When it comes to life insurance, the primary objective is to secure the financial future of your dependents. However, there are other ways to use life insurance to accumulate as well as distribute wealth. For instance, wealth accumulation is a process that life insurance policies offer by way of policies that are tailored to help you save towards retirement planning.
In such policies, one can save and invest money for their retirement, which can be used as an income stream to manage one’s finances in those years. There is also a way to leave wealth for the next generation that is served by life insurance policies.
To some extent life insurance policies that are savings and investment oriented taken in later years by an individual are a means to distribute wealth. For instance, in some ways the child plans offered by insurers is a way to ensure that there is money available to meet your child’s future financial needs, especially education. Such policies are a simple way to create a formal way of ensuring wealth distribution. Moreover, by clearly mentioning the nominee on your policy, you ensure that the proceeds of a policy go to the person intended for.
A type of insurance policy that works well to create wealth and transfer are single premium plans. In this type of life insurance, a single premium is deposited, creating an immediate death benefit that is guaranteed until the policy owner passes away. Many a times, older people buy such policies and leave their children and grand children as dependents, and use insurance as a way to bequeath and distribute wealth. Then there is the whole life policy, which widely works well when one wishes to bestow wealth on family members.
Wealth transfer is important topics for many people who are looking for smart ways to efficiently maximise the distribution of assets to their spouses, younger generations and in some cases even charities. Moreover, the tax efficiency of life insurance works in the best interests when distributing wealth. Under Section 10(D), the maturity as well as death benefits from a life insurance policy are tax free, which helps to efficiently distribute wealth to dependents or nominees.