In an ever-changing financial world, giving the gift of life insurance to your next generation can help provide more security and support for their future, as well as the peace of mind through the many benefits of AAFMAA (American Armed Forces Mutual Aid Association) Membership.
Occasions and milestones are perfect opportunities for gifting life insurance, from births and adoptions to the purchase of a first home, graduations, weddings, and birthdays — or even during the winter holiday season. You can also give yourself the gift of life insurance to help ensure your own financial stability and security for life. For example, Final Expense+ will cover your burial expenses to alleviate the burden of out-of-pocket payments on your loved ones during a difficult time. It could also serve as your legacy to your heirs or charities you support.
Providing Security for Your Kids and Grandkids
Gifting a life insurance policy to your kids or grandchildren is a smart way to provide them with financial security for the future with a policy that grows as they do — the value of their Generations Plus policy automatically doubles at age 18. You will be ensuring their financial security through:
- Guaranteed insurability against potential future life events that could result in the recipient becoming ineligible for coverage
- Lower rates locked in at the time of purchase due to their young age
- Protection against unforeseen tragic events which could result in sudden loss of life
- Future source of savings or borrowing, if it is a policy that grows cash value
Providing Security for Your Spouse
Providing financial security is also important if you have a spouse or partner who relies on your income or if you rely on theirs. If your spouse directly or indirectly contributes financially to the family, you’ll want to ensure a means to replace that contribution with coverage that can help pay off household debt, provide college tuition for dependents, or long-term financial support for the survivor.
If your spouse does not work outside of the home and you have kids, they should still have their own life insurance policy. Factor in the care they provide as a work-from-home parent. If your spouse were to suddenly pass, you would just as suddenly have to seek childcare that comes with expenses that were previously not factored into your household budget.
A spousal life insurance policy would give your family peace of mind knowing that, should tragedy occur to either spouse, steps have been taken to provide financial security to the survivors.
What Life Insurance Policies Should You Give Your Family?
Typically, permanent life insurance policies, such as AAFMAA’s Value-Added Whole Life are the gift of choice. Whole life policies are just that — policies that last for a lifetime — and accrue cash value over time. However, term policies can be a smart gifting option as well, depending on your current and long-term needs.
Another way to give the gift of life insurance is to pass along a policy you already own. As you age, you may realize you do not have use for a policy you purchased in your younger years. You may be hanging onto it to avoid the tax implications of cash-surrendering your policy. Or perhaps your spouse has passed away, your children are grown and successful, and your whole life policy is of little value to you now. Instead of taking a tax hit on the interest gained, you could gift the policy to a loved one or to a charitable organization. By gifting the policy, you no longer need to pay the premiums on it. If you have fully paid for the policy, you can then provide it as a valuable gift in the form of an asset your loved one could fall back on. Or, when you donate the policy to a charitable organization, you can usually get an additional tax benefit.
Gifting a life insurance policy falls under IRS “gift tax rules” which is currently at $18,000 per donor, per recipient in 2024 and will grow to $19,000 in 2025. Be sure to seek guidance from a trusted tax professional before gifting a policy so you can better understand the tax implications you could face or avoid.
How to Gift a Life Insurance Policy
If you’re looking to give the gift of a life insurance policy, one way to do so is by changing the ownership on it. Another option is simply to update your beneficiary, so the benefit will be paid out to them when the time comes. This method enables you to maintain control of the policy in the present, with the ability to make future changes should it be necessary.
To learn more about making AAFMAA life insurance a gift for your loved ones, reach out to an AAFMAA Membership Coordinator at 877-398-2263.
This article was originally published December 6, 2023.