Guaranteed protection. If you have family or others that depend on you, life insurance is a safety net.
Pay Final Expenses. Funerals and burials can easily be tens of thousands of dollars. Without life insurance, this can pose a financial burden on those already suffering emotionally from the death of a loved one.
Pay Off Debts. A family may need the insurance to cover debts, like a mortgage, so that they would not have to sell their home in the event of a death.
Income Replacement. If a spouse passes away and their income is used to help with household expenses, the survivor would need to replace that income to maintain the lifestyle. If there are young children in the home, the surviving parent would need domestic help with caring for their children (childcare, house cleaning, cooking etc.).
Tax free benefit. Your beneficiaries receive the total amount of the policy and are not generally subjected to federal income tax.
Types of Life Insurance
Permanent Life Insurance is a policy that doesn’t end until the time of death. There are different types of permanent life insurance products including, Whole Life. As long as the premiums are paid and there are no outstanding loans borrowed against the policy, this policy will cover you for the duration of your life or age 121. This type of policy can also accumulate cash value.
Term Life Insurance is a temporary policy that protects the insured for a certain period or term. Term insurance is typically purchased in large amounts for a smaller premium and designed to protect for short periods of time. An example of a term policy would be used for mortgage protection: a policy to help pay off the mortgage in the event of a spouse’s death.
Myths About Life Insurance
My Work Plan is Enough. Most group life insurance policies with employers have an actively working clause and some are as low as 30 days. In order for the group life insurance to pay out to your beneficiary, you would have had to work in the 30 days leading up to your death. While this is likely the case for an accident, an illness could likely fall out of the “actively working clause”.
It Costs Too Much. A study found that the majority of people overestimate the cost of life insurance by up to three times. There are affordable options to explore.