Surprising Ways to Profit from Life Insurance
One of the best and most obvious ways for people to profit from the existence of a life insurance policy is simply to take advantage of the fact that when the insured passes away the beneficiary is going to receive what is usually a large sum of money. It may be just large enough to cover funeral expenses but it can also just as likely be enough money to not only cover funeral expenses but also medical expenses incurred by the individual, 12 months living expenses for the family plus college educations for each of the children.
However, there is something in human nature and common decency that revolts against the idea of "profiting" from a life ending, especially when the life considered is the life of one that is loved. This feeling should be honored and we should not consider it a profitable experience when someone we love has his or her life come to an end.
On the other hand, if it's the insured focusing on the future welfare of people they love, then the insured has every right to become excited at the idea of investing a relatively small amount in life insurance so that if they should not make it all the way to their lifetime financial goals, the ones they love will be taken care of anyway. The individual actually insured has every right to be excited over the idea of profiting a hundred, or a thousand or even ten thousand times over from the small amount invested in life insurance. For just the cost of one month's premium an individual might leave to his or her beneficiary a million dollars or more. Now THAT'S a profit! Naturally not a profit that the average person would hope to collect on immediately but it's certainly a comfort for an individual that is financially responsible for others.
There are additional ways that some policies might profit an individual. Chief among these are the permanent life insurance policies, which build cash value over the years that one is paying premiums. Since insurance companies are investing part of the premium dollar a policyholder pays in each month, quarter or policy year, it's only right that some of that profit be returned to the policyholder for his benefit.
Some insurance contracts allow the withdrawal of this cash value in the form of a policy loan. While the policyholder has to pay interest on this loan until they pay it back to the insurance company, it's normally a nominal amount. What can also be very advantageous is that the policy owner does not have to ever pay back the amount borrowed, at least during the lifetime of the insured. Amounts owed at the time of the insured's death are simply deducted from the proceeds of the policy. In this situation the beneficiary's benefit in that most of the policy proceeds are given to them, but the insured also benefited in that he was able to have the use of at least part of the cash available in the policy!