How Life Insurance Can Help You Save For Retirement28 Apr 2021
Many people consider life insurance and retirement planning as two separate things. One is a financial cushion for your loved ones if the unthinkable happens to you. The other is a savings plan for your golden years.
But are you aware that life insurance can also be a source of savings for your retirement? Here’s how it works:
1. Maturity benefit
Certain types of life insurance provide a maturity benefit, which refers to a lump sum that's paid to you by your insurance provider upon the end of your policy's term.
So if your life policy covers you for 20 years, and you survive the term with no unfortunate incident, and you’ve paid up all your premiums during that period, you will receive a guaranteed lump sum cash payment once your policy matures.
Life insurance with a maturity benefit creates a win-win situation for you and your dependents. Your loved ones' financial future stays secure. And the payout you receive, along with whatever bonuses you get, can be used to fulfil other goals, such as your retirement fund.
Endowment plans and investment-linked plans (ILPs) are two types of life policies that include a maturity benefit.
2. Cash value
Some types of life insurance also come with a cash value, an amount that is taken from a portion of your premiums and accumulated over time. Typically, a life policy starts acquiring a cash value if it has been in force for at least three years.
Once your cash value has grown into a sizable amount, you can choose to withdraw some of it in case of an emergency. Or, you can use it to grow your retirement fund.
Certain endowment plans come with a cash value. ILPs also offer this benefit, where the potential earnings come from a portion of your premiums which are invested in funds of your choice. The amount accumulated will depend on how well your chosen funds perform.
Life insurance with a cash value benefit is another way for you to get more out of your life policy. Your loved ones get the financial protection they need while you get to grow your income at the same time.
It’s important to note that while life insurance can help you save for retirement, it shouldn’t be your main retirement savings vehicle. Remember, the primary purpose of a life policy is to provide financial protection for your loved ones. But it can also serve as another way to supplement your retirement nest egg.
If you are interested in exploring this option for your retirement plan, Gibraltar BSN offers several choices for you to consider. Check out GoProtect or GoProtect Platinum, as well as Cash Star and Go LiveWell.