#1. Pay for long-term care expenses.
Long-term care insurance is expensive, and adding a rider to a life insurance policy can be an effective way to get this coverage. Specialty products that combine life and long-term care insurance are also available. Whether the coverage comes as a rider or a specialty policy, using long-term care benefits typically reduces the amount of the death benefit.
It can be a good choice for people who want long-term care insurance, but aren't sure if they will need it.
#2. Provide benefits if you're terminally ill.
Known as living benefits, this perk comes standard on many term and whole life policies. The details vary by plan, but living benefit provisions generally allow those with a life expectancy of 12 months or less to receive a portion of their death benefit in advance.
#3. A source of cash if you're disabled.
Policyholders don't have to be dying to get their death benefit early from some insurers. Many plans offer chronic illness or critical illness riders that may pay out funds if a person becomes disabled or experiences a heart attack, stroke or invasive cancer, among other things. These options can provide a vital safety net to people who are unable to work and have mounting medical bills.
#4. Give one last gift to a favorite charity.
You could leave the money in your savings account as a bequest to an organization, or you could use some of that cash to buy life insurance and give substantially more. Depending on the policy, your age and health, you may be able to turn small monthly premiums into a large donation.
#5. Ride out a bear market.
One of the more novel approaches to using permanent life insurance is as a safeguard against a sagging stock market. This strategy only works with insurance policies that have cash value. Retirees can take a tax-free loan from a policy rather than withdrawing money from retirement funds. Then, when the market rebounds, gains from investments can be used to pay back the loan.
#6. Minimize your taxes in retirement.
Leveraging loans from a whole life policy isn't just something for bear markets. Policyholders can treat that life insurance as their own personal pension, by working out a strategy of withdrawals and loans that will let them create an ongoing stream of tax-free money in retirement.
#7. Insure the life of a child.
Although parents can buy an insurance policy specifically for their child, they could also add a rider on their own plan. Many insurers offer child protection riders at a low cost and with flexible premiums
#8. Cover a child's college costs.
Another way to use life insurance to help a child is to take out loans from a whole life policy for tuition payments. Often, the guaranteed loan rates [on many policies] are better than the rates for student loans. Rather than paying interest to a bank or the government, that money goes back into the policy.
#9. Waive your premiums.
Premium waiver riders also come standard with many policies, and these provisions can help those who become disabled keep their coverage. The rider eliminates premiums for those who have a qualifying injury or illness.
#10. Return your money if you don't die.
Your life insurance company could return all your premiums if you reach the end of a policy's term and never make a claim. You have to pay extra for a return of premium rider, and it may make more financial sense to invest that money instead. However, some people like knowing they will get all their money back if they end up outliving their life insurance.