What is life insurance?

Life insurance is a contract between the insurance company (insurer) and insured (individual or entity) that insurer promise to provide benefits to the beneficiary base on the premiums paid by the insured.

Everyone has goals. They are including with owning a new home, paying off the mortgage, securing your family and something else. Achieving these goals depends on things like steady income or good health. But these can be derailed by unexpected events such as auto accident, unemployment, major illness or death. Unfortunately, you cannot avoid that. But you can cover you, your family and loved ones financially.

Living benefits of life insurance

Most people buy life insurance with one goal in mind. They want to make sure their family will be taken and care about their gone. The proceeds from a life insurance policy know as death benefits can help to ensure loved ones will have the financial resources that they need to maintain their lifestyle. But it is not the only way that life insurance can benefit you and the people you care about.

We can found out many ways that you can use life insurance to create financial security for you and your loved one’s while you are alive.

Which types of insurance offer these benefits?

Typically, there are two primary types of life insurance. Term life insurance and permanent life insurance. Permanent life insurance is also known as whole life insurance. It is the type of insurance that offers living benefits.

Term life insurance is temporary coverage that provides death benefits for a specified period of time (typically 1-20 years). Whatever duration you choose and if you die during that time, your policy is placed, and your beneficiary receives the death benefits. Once the term policy expires your coverage end. If you need to continue the coverage for more time period you have to reapply for it. Simply it is like renting an apartment. Within the agreed time period you receive the rent and after it expires, you have got nothing. the reson is Most people tend buy term insurance is to cover financial obligations that will disappear over time, such as a mortgage.

Permanent life insurance is an asset you own. It stays with you for life and builds equity, just like you build equity in your home. In the insurance view, we call equity as cash value. It grows tax-deferred and increases based on the portion of your premiums paid and dividends that insurance companies pay.

In this review, we discuss fundamental benefits available with life insurance policies and a few reasons why you should invest in life insurance.

Common Benefits of life policies

Life insurance policies provides a financial safety net for dealing with the adverse financial issues that arise with insured death.

To pay the final expense

To cover children’s Expenses

To replace the spouse’s income

To pay off debts

To buy a business partner’s shares

Charitable contribution

Depending on the policy, Life insurance generates a cash value

Life insurance related to favorable Tax treatment. To pay off the estate tax Tax-free payouts

Policy discount

Final expenses

Final expenses include your funeral cost, hospital bills and other outstanding payments. Life insurance helps to your loved one’s cover these financial costs arise with your death. Especially insurance companies have designed final expense life insurance for the people who only focus their final expense by purchasing life policy.

The average cost of funeral and burial can easily be running up to 10,000 dollars and even more. We know that you don’t want to see your loved ones suffer financially in addition, emotional at your death.

Children’s expenses

Most parents want to be sure that their children are in healthy and securely. Purchasing a life insurance policy will help your family to cover the children’s expenses after your death. Always children come with a lot of expenses such as daycare expenses, parties, educational fees, medical care and entertainment. Your life insurance policy will cover these expenses and make free your loved ones from financial stress.

Replace the spouse’s income

What happens to your spouse after you die? Life insurance will replace the lost income of your spouse’s to keep her or his lifestyle at the same level. So no need to think too much about their future.

Pay off debts

Debts are something that you have borrowed from the other party, and you have an obligation to give them back. Typically debts include credit card debt, mortgage, auto and student loans and etc. life insurance helps to pay off these debts after insured death.

Buy a business partner’s shares

If you are involved with a business partnership, it is important to buy life insurance. The reason is when you die, your family members have to face a number of different risks such as share ownership, dividends and more, associated with partnership business. Your life policy can help to buy a business partner’s share after your death.

Charitable contribution

Life insurance can be used for the purpose of charitable contributions. Typically some wealthy individuals buy larger insurance policies to protect their charitable giving. If you want to keep your charitable contribution in stable even after your death your insurance policy will help you that. And also you can protect your loved ones from the financial difficulties associated with social responsibilities.

Build cash value component

Whole life insurance policies allow you to build cash value over time. This is one of the major reasons that most people purchase permanent life policies. You can tap this cash value at any time to pay your educational and medical payments. We cannot see the cash value component in term policies. So if you are a kind of a person who is looking for generating cash value component you have to purchase a type of permanent life insurance such as whole life insurance or universal life insurance.

Pay off the estate tax

Insured can use life insurance to pay off their estate tax. And also buying a life insurance policy will be caused to reduce their estate tax rate. Therefore some high net worth individuals buy life insurance policies focusing on reducing the estate tax.

Tax-free payouts

Why most people buy life insurance? Typically it is for death benefits. When you die, your loved ones suffer from loss of income, so you buy life insurance to protect them. Your beneficiary receives your Death benefits tax-free. Most states encourage peoples through the tax-free benefits to purchasing life insurance policies.

Policy discounts

You can buy a multi-policy from the same company and get policy discounts. This is the discount for a loyal customer. Contact your insurance agent and ask about the available policy discounts.

By having the right type of life insurance with affordable amount, you can continue to achieve your goals and objectives and enjoy peace of mine. Choose the right type of cover you need and protect the people you care about most.

The disadvantage of life insurance

In the economic view, life insurance policy is a cost. You have to expenditure a certain amount of money for that. So, there is an opportunity cost of life policy.

If you are looking for to manage investments with the insurance policy you have to buy a permanent life policy. Only they are the offer chance of cash value accumulation. Therefore premiums are much higher than others. Sometimes ten times bigger.

Risk of not paying policy. Typically life insurance is purchased for the benefits of the loved ones. They receive the benefits after your death. But who know that they will receive or not the benefits. Therefore make sure to purchase your policy from a well-established insurance company especially long term insurance policies.

One of the excuses people tend to May not buying life insurance is the cost. But truthfully, we can see hundreds of life insurance policies offered by life insurance companies are pretty affordable. Having life insurance means you and your beneficiaries can prepare for any eventually. Because No one can truly predict the future.

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