Death and disability are topics we typically hate to discuss, until we are forced to have the conversation, which is often too late. At my age, I’ve sadly experienced the passing of numerous friends and family. Death in itself is difficult, but it becomes devastating when families are tasked with having to borrow money for a proper funeral and drastically restructuring their lifestyle, due to the passing of the bread-winner. These events can transform a middle class household into a low-income household, with college aspirations often evaporating for the kids of the deceased.
This is why proper financial planning for death and disability is essential for those with dependent family members and life insurance offers an optimal plan. So, let’s highlight a few benefits of having proper life insurance.
Life insurance is meant to protect your family’s financial future. Even if you have savings, it’s unlikely it would be enough to financially protect your family for multiple years. This is where life insurance comes into the picture, as it will provide money to your chosen beneficiary, upon your death. This benefit is typically provided via a term life, whole life or universal life.
Term Life Insurance
This type of life insurance offers coverage for a set period of time — generally 10, 15, 20 or 30 years. Coverage expires at the end of the term; however, most term life insurance policies offer optional riders that could allow you to renew or convert your policy.
Whole Life Insurance
This type of life insurance doesn't expire as long as you continue to pay the premium, while offering a cash value component that has growth potential. You can also borrow from the cash value, but loans or withdrawals may generate an income tax liability, while reducing the cash value and death benefit. Loans will also accrue interest.
Universal Life Insurance
This type of life insurance is similar to whole life , because it does not expire as long as you continue to pay the premium, while also having a cash value component. With a universal life policy, you typically have the flexibility to adjust the premium and death benefit. However, there must be enough cash value in the policy to cover monthly charges, if a lower premium is paid than the amount selected at policy issuance or if a premium payment is skipped. Also, increases in coverage are subject to underwriting.
Another important reason for purchasing life insurance is to assist your beneficiaries in settling debts and expenses after your passing. This includes expenses such as mortgage, credit card, vehicle and student loans. Thus ensuring the debts accumulated during your lifetime, do not become the burden of your loved ones.
At a time when your loved ones are dealing with your loss, life insurance can assist in easing the financial burdens they may experience after your passing.
Apart from beneficiaries, you also benefit from increased financial security by purchasing life insurance coverage. Individuals who purchase life insurance coverage do not have to wait until they die for their family to reap benefits. As certain policies offer investment planning, allowing owners to withdraw cash value. This benefit can be used for long-term care benefits, mortgage loans, or income after retirement.
Life insurance payouts are mostly tax-free for beneficiaries, allowing them to use the money for their financial goals. It gives beneficiaries additional financial security for plans such as starting businesses and additional education aspirations.
Business owners and partners can improve their financial security by obtaining life insurance. Partners can secure life insurance policies on one another, thus ensuring the business continues to prosper, in the event of the untimely death of one another.
Life insurance gives you peace of mind, with assurance that your family and loved ones will be well taken care of when you die. Although the payout cannot take the place of a loved one, it gives beneficiaries peace of mind by preventing financial hardship.
Contact us today to learn more and further protect your loved ones!