In an ever-changing financial world, there’s something you can pass on to your next generation that will take care of them for life. Offer your loved ones peace of mind by passing on the benefits of AAFMAA (American Armed Forces Mutual Aid Association) through the gift of life insurance. Occasions and milestones that are perfect for gifting life insurance include births and adoptions, the purchase of a first home, graduations, weddings, and birthdays — or even during the winter holiday season. Giving the gift of life insurance is making a promise to cover that special someone for years to come.
A gift of life insurance for yourself might seem an odd choice; however, the reasons for doing so can be incredibly important and meaningful since the benefits received from a policy can help ensure financial stability and security for life. For example, it provides final expense payment for your burial so that your loved ones won’t be burdened, or it could serve as your legacy to your heirs or charities you support.
Purchasing a policy as a gift to cover a loved one is a terrific way to provide financial security for a young child or grandchild. Financial security is provided in multiple avenues, such as:
- 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 financial security is also important to anyone who has a spouse or partner. If your spouse directly or indirectly contributes financially to the family, it is important to ensure a means to replace that contribution, pay off household debt, provide college tuition for dependents, or long-term financial support for the survivor.
Providing Security for Your Loved Ones
If your spouse does not work outside of the home, you may wonder if they need their own life insurance as well. If your spouse stays at home and you have kids, you need to factor in the care they receive from their work-from-home parent. If your spouse were to suddenly pass, you would suddenly have childcare expenses that were never factored into the 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?
The type of policy typically gifted is permanent, such as AAFMAA’s Value-Added Whole Life. Whole life policies are just that — 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 the policy. Or maybe your spouse has passed away, your children are grown and successful, and you own a whole life policy that is now of little value to you. Instead of taking a tax hit on the interest gained, you could gift the policy to a loved one or charitable organization. By gifting the policy, you no longer need to pay the premiums on it. Alternatively, 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. Alternatively, donating the policy to a charitable organization will provide you with an additional benefit of a reduction in your tax liability.
Gifting a policy falls under IRS “gift tax rules” which is currently at $17,000.00 per donor, per recipient in 2023 and will grow to $18,000 in 2024. It is suggested you seek guidance from a tax professional before gifting a policy so you have a good understanding of the tax implications you could face or avoid.
How to Gift a Life Insurance Policy
One way to give the gift of a life insurance policy is by changing the ownership on it. Another option is simply to update your beneficiary, so the benefit is paid out to them. This method enables you to maintain control of the policy and gives you 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.