What are the benefits of life insurance?

by Charlotte Lancaster We believe in Quality

Most people understand the primary benefits of having life insurance coverage: Your family gets the money if you die unexpectedly - and you get the reassurance of knowing they’ll have resources to help carry on without you. While those advantages are generally true for all kinds of life insurance, there are other important advantages according to the specific type of policy and amount of coverage you get. There are also benefits for women, too.

Father and daughter playing at home

It can help take care of your family if something happens - but that’s only one of the benefits of life insurance. Covid 19 Insurance Buy, Buy Health Insurance Online India

This article will help you better understand three important questions:

Do you know the many advantages to have a life insurance policy for you and your family?

What are the benefits of different types of policies?

How can you get more “advantages for the buck” when buying life insurance?

The many great things about having life insurance

All life insurance coverage can give you financial confidence that your family will have monetary stability in your absence. But generally, the more life insurance you have, the even more benefits it will provide to your loved ones when needed. For example, some people receive a nominal level of life insurance coverage - say $25,000 - through their workplace. While that theoretically sounds like a good sum of money, in practice it may only be enough to cover funeral expenses and a few mortgage payments. But with a larger coverage amount, your family can realize far more benefits, such as:

Income replacement for years of missing salary

Paying off of your home mortgage

Paying off other debts, such as for example car loans, credit cards, and student loans

Providing funds for your kids’ college education

Helping with additional obligations, such as care for aging parents

Beyond your coverage amount, different kinds of policies can provide other benefits as well:

There are tax advantages of life insurance, because death benefit payouts are generally tax free; and some policies have features that can help transfer money to heirs with fewer tax liabilities.1

Some policies have a cash value that accumulates over time2 and can be used to pay premiums later, or even tapped into to help live on in retirement.3

Life insurance plan can often be bundled with other types of security, such as for example disability insurance to replace a portion of your salary if you’re unable to work.

Several policies have useful “riders” or contractual provisions that provide benefits before death.

The benefits of different types of life insurance

You can find two basic kinds of life insurance coverage: term and permanent like whole life. With a term life policy, you pay a specific premium for a defined term (say 10 years). If you die during that time, a death benefit is paid to your beneficiaries - but when the term is over you must get new protection or go without. A whole life policy is permanent life insurance that last your entire life.

Do you know the advantages of term life insurance?

Typically, lower cost

Simpler to understand - it’s purely an insurance product

It may be convertible to very existence - but find out before you buy

If you no longer need it or can’t afford it, you can walk away without losing anything more than the premiums already paid

What are the benefits of whole life insurance?

Permanent life insurance coverage

Contains an important savings element known as cash worth that you can take out or borrow against

Can provide tax-advantaged estate preparation benefits

How to get more benefits - and value - when purchasing life insurance

Generally, the most cost-effective way to buy life insurance is to do it when you are younger and healthier. Life insurance companies usually give younger customers lower rates for reasons that are easy to understand:

They tend to have a longer life expectancy

They are less likely to have been diagnosed with a serious disease

They are likely to pay premiums over a longer number of years

Not inside your twenties anymore? Don’t worry. There are still a lot of affordable options. But if you need to obtain the most worth out of each high-quality dollar, it pays to do your homework and figure out exactly what you want from your coverage. Most guidelines possess riders that can add worthwhile advantages for a relatively small added quantity. Two of the most popular riders include:

Accelerated death benefit: This rider can help pay for required care of a diagnosed chronic or terminal illness. While this can be very useful in a time of need, you should also know that funds paid out will typically lower the dying benefit compensated to your loved ones.5

Disability waiver of superior: This valuable rider gives you the ability to end paying premiums in case you have a disability while keeping your coverage.6

There are other forms of riders you should know about as well, so talk to an experienced professional - like a Guardian financial professional - before deciding to purchase one policy or another. You should also find out about other ways to control your policy costs, including:

Purchasing a joint plan for you as well as your spouse

Getting insurance coverage at group prices through your employer

Purchasing a whole life policy that accumulates cash value, which can be used to reduce regular monthly premium costs later

Frequently asked questions in relation to life insurance

What’s better: A term life policy or perhaps a whole life policy?

It really depends on what you want: Both policies provide a death advantage, but very existence policies can offer additional benefits and offer more flexibility than term plans; also, the premiums tend to stay the same for existence. Term life policies provide less benefits but are also less expensive - and while your premiums remain stable over the term of the plan, once it expires you can expect to pay significantly more for the next policy.

Read more: Term vs. whole life insurance (note new article, link when available)

How much life insurance do I need?

You can find general rules for determining how much life insurance you need. Typically, people want to provide plenty of a dying benefit to cover up the lost income and key costs - like a mortgage - that their family will face, especially while their kids are still at home.

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Do you know the life insurance policy options for seniors?

It depends on your needs. Life insurance generally gets more expensive with age, so several seniors get policies with just enough coverage to provide for funeral expenditures to avoid burdening their family members. Life insurance can also be used for estate planning strategies, where it can be a tax-advantaged solution to leave resources to heirs.

Is life insurance coverage taxable?

Generally speaking, the death benefit of a life insurance policy is not subject to income tax. In case you have a $1,000,000 policy, your family will get the entire amount. However, consult your tax professional for details.