The death benefit of a life insurance is a permission slip of sorts. You might look at me with a weird look when I say this, but it makes a lot of sense. Let me explain what I mean by this.

During your working years it is important to save money for your retirement and for some it is important to leave money behind. If leaving money behind for your spouse and kids is important to you, then you may want to consider permanent life insurance. You didn’t save that money over the course of your career, so you could go into a shell in retirement. The concept would allow the insurance company to leave the survivors money and give you a permission slip to spend your money.

For example, let’s say hypothetically you have 5 million dollars in assets that is generating at 5% a year a 250k retirement annual income.  Let’s say you also want to leave your wife and/or kids enough money to be able to also generate 250k a year from interest off of the principal. What if you could receive more money a year by spending interest and some principal. If you had a death benefit of 500k at retirement that was permanent, it would allow you to spend 500k of the principal. In other words, you could spend part interest and part principal up to 500k over time. Maybe start with 250k a year and adding an inflationary amount of 5% each year in income. The idea is that the 500k death benefit will replace the spent money when you pass away. You need to map something like this out carefully, but that is the basic concept and a powerful one if used properly.