5 Top Benefits of Life Insurance
1. Life insurance distributions are tax free
If you own a life insurance policy and die while it is active, your beneficiaries will receive the lump sum death benefit. Life insurance payouts are not taxable income, and your beneficiaries do not need to report the money when they file their tax returns.
2. Your dependents don’t care about living expenses.
Many experts advise taking a life insurance policy of seven to ten times your annual income. If you have a substantial policy (or policies), your income dependents won’t have to worry about living expenses or other large payments. For example, your insurance policy can cover the cost of your children’s college education, eliminating the need for them to take out student loans.
3. Funeral expenses can be covered by life insurance
As of 2021, the national average cost of a funeral is $7,848.4. Paying for a funeral can be a significant expense, as many Americans don’t have enough funds to cover even a $400 emergency bill. Burden.5 If you have a life insurance policy, your beneficiaries can use the money for your funeral without dipping into their own resources or borrowing.
Some insurance companies offer last cost insurance. These insurances offer limited coverage and have minimal monthly premiums.
4. Can cover chronic and terminal diseases.
Many life insurance companies offer endorsements, also known as riders, that you can add to your policy to supplement or modify your coverage. Under certain conditions, an accelerated benefits rider allows you to access some or all of your death benefit. For example, some policies allow you to pay for treatment or other expenses while you are alive, if you have a serious illness and are expected to survive for less than 12 months.
5. Insurance can help supplement your retirement savings
In addition to paying death benefits, a whole, universal or variable life insurance policy can accumulate cash value. Cash value that accumulates over time can be used to cover expenses such as buying a car or making a down payment on a home. You can use it throughout your retirement if needed.
On the other hand, a life insurance policy should not be used as a substitute for traditional retirement plans such as a 401(k) or IRA. Also, cash value life insurance is more expensive than term life insurance, which has no savings component and only provides a death benefit.
5 Top Benefits of Life Insurance – Life insurance is not just for the rich. Life insurance ensures that your loved ones will meet their needs in the event of your death, regardless of your income level. Also, life insurance may be less expensive than you believe. If you decide to buy life insurance, check out Investopedia’s list of the best life insurance providers in 2023.