As we age, there are a lot of anxieties that may be completely new to us. Living without a job as a source of income after retirement can be a difficult transition even if you have set up your retirement and savings to have you well prepared for the future.
Finding other sources of income as a senior, such as passive investment income, is common on many senior living sites. However, not many seniors realize that they might be able to use life insurance as a source of income.
Today, learn more about how seniors are using life insurance as a source of income and decide if this might be a great way to proceed.
Why Some Seniors Use Insurance For Income
Living for a long time is a wonderful thing until you find yourself running low on money. In some cases, seniors have let their life insurance policies lapse because they can no longer pay the premiums or they simply don’t need the benefits any longer.
Savvy seniors with great investment leads have found that there is actually a better option than simply letting the policy go: you can get a payout from the insurance policy.
When income revenue streams are limited or they simply want to rearrange how their finances are organized after retirement, seniors are using their life insurance policy settlement payout as a source of income that they can rely on in coming years.
This is not the right option for all seniors, but many find it to be a great situation to consider. When doing an insurance settlement, seniors typically receive up to 5x more than they would if they surrendered the policy outright. This makes it a great choice for those that cannot afford to pay for their policy any longer but need the income.
The money made from a settlement can be used for anything you want: once received, the money is yours to do with as you please! Many seniors choose to reinvest it into a form of investment that pays out more actively, but that decision is yours.
How Seniors Use Life Insurance For Income
Seniors get income from their life insurance policy by doing a life insurance settlement. To do this settlement, you will be selling your life insurance policy to a third-party. This third-party is typically an investor group, and that group will then pay you cash. You are no longer involved in the policy, and the group will take over premium payments and receive any relevant payout when the policy ends.
There is not a specific age that you need to be in order to be able to do a life insurance settlement, but most investor groups are most interested in policies with a life expectancy of 15 years or less.
Choosing Your Plan
What is the best life insurance for seniors? Those that want to use their life insurance as a source of income will need to choose carefully; not all insurance types work with this type of plan.
To be able to do this type of settlement, you will likely need to have permanent life insurance coverage. This type of coverage offers protection for your entire life and typically insures you at a higher value.
Term insurance, on the other hand, only lasts for a specified amount of time. Term life insurance also offers the most coverage at the lowest price, so it’s very common for seniors to have this type of coverage in place. Doing a life insurance settlement with this type of policy is less likely, but you may be able to borrow against it if you want to bring some of the money out early for income.
Even if you plan to ultimately use your new life insurance policy for income, make sure that you are shopping around to find the right fit. It’s common to overpay for life insurance without realizing it. Doing this when trying to generate an income stream can be a big problem, so make sure that you compare policies and do the math before signing on with any company.
Aging With Grace: Life Goes On
As you get older, you want to be able to sit back, relax, and not stress about money. Still, there are a few things that you will ultimately need to think about. Just as you might be thinking about generating more income to take care of your living expenses, you might also be considering what your final expenses will look like.
If you are concerned about your loved ones needing to take care of your final expenses after you use up your life insurance for income, you may want to set up a policy with one of the many final expense insurance companies out there.
Final expense insurance companies help set seniors up with plans to cover the cost of their funeral, burial, and other arrangements after passing. This ensures that your loved ones will not need to struggle to cover these costs, and it can be a great gift to leave behind.