How to use life insurance while you’re alive

Life insurance is often regarded as a way to make sure your loved ones are covered after you're gone, but there are several ways you can use it while you're still around. Here’s how.

How to use life insurance to buy a house

Permanent life insurance policies, such as whole life or universal life, can accumulate cash value over time. This cash value can be accessed through policy loans, which typically come with lower interest rates than traditional loans, making them useful for a down payment or other home-buying expenses.

Borrowing against the policy’s cash value

If you have a permanent life insurance policy, you can borrow against its cash value. This can serve as a down payment or help cover other costs associated with purchasing a home.

Using life insurance as collateral

Some banks allow you to use your life insurance policy as collateral for loans, providing another way to help with a down payment.

What is a living benefit rider?

A living benefit rider, also known as an accelerated death benefit, allows policyholders to access a portion of their death benefit before they pass away. These optional benefits can be added to a policy and offer financial support in situations such as terminal illness, chronic illness, or long-term care needs.

While no one anticipates such diagnoses, having a living benefit option can help provide financial flexibility during a challenging time.

How to use life insurance to build wealth

Wealthy individuals often leverage the cash value of permanent life insurance, such as whole or universal life, as a strategic tool for building wealth. That’s because while the cash value of the policy grows tax deferred, it can also be accessed for loans or withdrawals that can be used in other investments. Unlike term life insurance, which covers you for a specific period, or term, these policies grow with you, making them better positioned for long-term financial planning.

Using term life insurance while you’re alive

While term life insurance primarily provides protection during a specific period, it also has the flexibility to be used in several other ways. Some term policies come with riders for chronic, terminal or critical illnesses which you can tap into if needed. Many can also be converted into permanent policies later on, giving you the opportunity to build tax-deferred cash value.

Life insurance is more than just protection for the future — it's a versatile tool that can help you navigate your financial journey at every stage of life.