Life insurance is a contract between an insurance policy holder and an insurer, whereby the insurer agrees to pay a designated beneficiary a sum of money (the benefit) in the event of the insured person's death. The policy holder typically pays a premium, which represents the price of the insurance protection.
Many people consider life insurance to be one of the most important purchases they will ever make, second only to buying a home. It can provide peace of mind by ensuring that loved ones will be taken care of financially if something happens to you. And it's not just for those with young families – anyone who has dependents or owes a significant amount of debt should have life insurance. Here are some top advantages of having a life insurance policy.
1) Your Dependants Won't Have To Worry About Money
The main aim of life insurance is to protect your family by providing them with enough money to cover expenses should something happen to you. The amount will depend upon various factors, including the type of policy you have and the number of premiums that have been paid. If you were to pass away without life insurance, your dependents would have to cover your debt, manage everyday expenses without your income, or possibly even take out a loan. However, it's always smart to seek helpful advice on annuities from a financial advisor. They will be able to help you choose the right life insurance policy for your dependents and ensure they will be secure financially. Also, a financial advisor can help you save on taxes and maximize your coverage.
2) There's No Tax On Payouts
Life insurance payouts are not subject to income tax – this makes them a fantastic investment compared to other investments that lead to high capital gains or interest payments that have been taxed at source, such as a fixed deposit. This means that the entire benefit sum can be used to cover expenses for your dependents. Contrary to other investments that have high capital gains, life insurance policies are not taxed on returns or capital gains.
3) You Can Get Cover For Terminal Diseases
Life insurance is not just for covering your dependents, but also for providing them with money in the event of your death. What if you die from a terminal disease? This type of life insurance can cover that too! It's important to know what illnesses are covered by this type of coverage. For example, many policies will cover cancer or heart attacks because these are considered terminal diseases. However, HIV/AIDS and diabetes would not be covered if they were diagnosed as terminal at any point during the lifetime of the policy holder - even if they were diagnosed after the policy was purchased. But there are still ways to get coverage for these types of illnesses through other forms or insurance like long-term care plans. Make sure you understand all of the terms and conditions involved before you sign on the dotted line.
4) You Can Get A Loan Option On Your Life Insurance
For most types of life insurance, you can get a loan option that enables your beneficiaries to use some or all the money in the policy if they need it. All that's required is for them to provide proof of income and sign on the dotted line. The payment schedule is then set up based on what they can afford, which will be determined by their income. Other times, the insurance company would handle the payment of the loan with monthly installments over 6 years or so. This is usually referred to as a "mortgage" and can help ease the burden of expenses for your beneficiaries.
5) Peace Of Mind
This is arguably the biggest reason to get life insurance. Whether you're young or old, there's always that nagging feeling that something else could happen before you have the chance to plan for it. With term life insurance policies, you can lock in a set monthly payment to help your family and yourself for the next 20, 30 or 40 years. No matter what their age is when you die, they will be able to pay the bills and cover any expenses without having to worry about it.
6) You Can Plan A Secured Retirement
This is somewhat of a bonus option you can get with certain types of life insurance policies. This type of policy works for someone who wants to set aside money now so that once they pass on, their beneficiaries will have some kind of income stream they can rely on. They would receive monthly payments from the policy and this would continue for as long as they live. The only problem with this is that you can't withdraw or borrow against the funds unless it's an extreme circumstance such as a major medical emergency. However, this is still an excellent way to prepare for your retirement without having to worry about how your spouse or children will survive.
How To Choose A Life Insurance Policy?
Now that you know the advantages of having a life insurance policy, you might be wondering how to choose the right life insurance plan for you. Some important factors to consider are your age, the number of dependents that need to be provided for and whether or not you already have some kind of life plan (pension, retirement savings accounts, etc.) in place. With term life insurance policies, you can't invest the money you put in, but it's still a great way to plan for things like long-term care expenses or future medical needs.
It's also important to mention that there are different types of life insurance policies that can be purchased, including whole life and universal life. There's also something called a variable life insurance policy, which can be useful if you intend to invest some of the money you put aside for your beneficiaries.
Life insurance can offer a number of advantages for you and your loved ones. It's important to understand the type of life insurance policy that is best suited for your situation before making any decisions, though. So, do your research, make some inquiries before you buy and most importantly, enjoy the peace of mind that comes with knowing all your bases are covered.