"Life insurance can be the ultimate financial swiss army knife.It has a multiplicity of uses, and if you use it properly you cando some great stuff with it, but if used inproperly you can cutyour hand off," says Joe Templin, managing director of Unique Minds ConsultingGroup.

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Indeed, life insurance is best known as a product that can protect aclient's family and help them maintain their economic well-beingwhen the client dies. But life insurance can do much more thanthat. Financial advisors are helping their clients set up lifeinsurance plans that will aid in their retirement goals, too. Lifeinsurance can provide cash benefits, serve as a second source ofincome for a spouse, or provide an opportunity forannuitization.

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Extending enjoyment in retirement

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One of the most common ways that married couples, particularlythose whose children are grown, use life insurance is to extendtheir income in retirement for both the husband and the wife.

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Templin said that married couples are all too aware that wivestypically outlive their husbands. So if the husband has a pensionor an annuity, when the time for retirement comes, he will take themaximum payout on that policy so that the couple can have as muchincome as possible to enjoy during their remaining years together.Then, when the husband dies, the wife will be left with the deathbenefit from the life insurance policy to live on for the rest ofher life.

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"It really just allows [the client] to spend down more of hisretirement asset, because he knows that the day that he dies hisspouse will get that insurance benefit," said Ronnie Huie, CEO ofHuie Financial Services.

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He also noted that in dual income situations, couples may wantto consider purchasing a life insurance policy for the wife, as well, tomake sure that all income streams are covered.

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New cash benefits

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If a client purchases a permenant life insurance policy at ayoung age, the policy has several decades to accumulate cash value.According to Mark Carruthers, an independent certified financialplanner, this could provide an opportunity for the client to takean essentially tax-free loan out of the policy.

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However, Carruthers said that he hasn't seen many people takeadvantage of this option.

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"In my personal experience, many of my clients haven't had theirpolicy long enough to take advantage of this option," he said. "Butwith colleagues who've been in the business a bit longer, when acouple either gets divorced or has a job loss, it seems like theinsurance is always the first thing to go."

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Carruthers said that defeats the purpose of protecting theirincome for so many years. In fact, he often cautions clientsagainst using life insurance as a means of protecting both theirbeneficiaries and their own retirement — because if somethinghappens and those premiums don't get paid, that's two incomestreams that have been jeopardized.

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Annuitizing cash value

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Another way that clients can take advantage of their lifeinsurance policies in retirement is to split their policies andannuitize a portion of the cash value to use for emergency expensesor to help fund their retirement. Templin said this strategy wasparticularly effective for people who may want to save some portionof the death benefit for their beneficiary, but may not need asmuch as they originally established in the policy.

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He refers to this as a chopped plan; the cash value getsannuitized to create an income stream that the individual neveroutlives, but a portion of the death benefit is still inplace.

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"Typically those policies are decades old," Templin said."Somebody who's now 75 or 80 years old who had those policiespuchased in their 20s or 30s, they’ve matured for 30 or 40 years.They bought them to cover maybe their children, but those needsaren’t there any more, so the death benefit isn’t needed as much asit was previously."

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Switching buckets

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Some clients may be concerned about investing in life insurance, particularly a permenant life policy, which maycost them quite a bit in additional premiums. But Huie said it'snot often a matter of spending additional money; it's just aboutswitching the buckets where current investment money is beingallocated.

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He related the story of a client who purchased a policy that wasguaranteed paid in 10 years. They funded the policy by paying fiveyears' worth of payments from his 401(k), and the other five yearswas taken from his pension.

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Shortly after, the client was diagnosed with a malignant braintumor and passed away. His wife used the benefit to pay for hermortgage, purchase an annuity, and set up a fund for her sons toattend graduate school.

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"Permenant life insurance is not the answer to everything," Huiesaid, "but it is another arrow in your quiver. It’s another tool inyour toolbox. I don’t have anybody that goes to the country club,goes golfing and says 'Boy my life insurance is sure kicking butt!'But every one of my clients is glad that they have it."

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