The Importance of Life Insurance
Life insurance is a form of financial protection. It can help cover funeral expenses and provide a financial source of income for your family.
Often overlooked, life insurance is an important part of a comprehensive financial plan. Read on to learn why it’s so critical and how you can get started today.
It’s a form of savings
Life insurance is a type of financial product that pays a designated beneficiary a sum of money upon the death of the policyholder, depending on the terms of the contract. It is an important form of savings that provides peace of mind and financial security for family members.
In order to determine how much life insurance is needed, it’s helpful to think about the people who depend on you financially. These may include your spouse, children or parents.
Once you know what expenses your loved ones would have, use our coverage calculator to estimate how much insurance you’ll need. We can also help you assess whether you’re eligible for a reduced premium, which can save you hundreds of dollars in the long run. You’ll also want to consider your contestability period, which is a two-year time frame during which the life insurance company has the right to challenge your application if they feel you have misrepresented yourself or were unfit during the application process.
It’s a form of protection
Life insurance is a type of policy that promises to pay out a lump sum in the event of death, or other events, such as critical illness or terminal illness. These events are defined in the contract and can be triggered by certain conditions.
A life insurance policy is usually purchased for a specific period of time and can be renewed as required. This can be in the form of a premium payment term, policy term or maturity benefit.
Some policies, like whole life and universal life, have a cash value component that grows tax-deferred. This can be a valuable asset-building tool because interest and dividends credited to the cash value are not subject to income taxes. In addition, some whole life and universal life policies allow the owner to borrow against the cash value of the policy, which reduces the amount that will be paid to beneficiaries in the event of death. This feature can be useful when planning for a child’s college education, as well as funeral expenses.
It’s a form of retirement planning
Whether you’re concerned about preserving your legacy or planning for the unexpected in retirement, life insurance can be an important part of your financial strategy. Many people forgo things they want to do in retirement because they are focused on making sure their families are taken care of in the event of a tragedy, or they feel unsure about how they’d be able to cover an unplanned expense with their savings.
Fortunately, permanent life insurance policies like whole life, universal life and variable life can provide a valuable resource for retirement planning. They can build cash value tax-deferred and offer access to this cash value through policy loans or withdrawals.
This cash value can be used to supplement your retirement income, but it’s important to note that the funds you use to borrow against your policy are not tax-free. The interest that you pay will affect the cash value of your policy, which may reduce your death benefit.
It’s a form of estate planning
Estate planning is an important part of every individual’s financial life. It allows you to control how your assets will be distributed and to minimize the amount of taxes you pay on them when you die.
It can also help you protect your family from potential long-term care and disability costs. It can also provide your heirs with funds to cover funeral and burial costs.
One of the first steps in creating an adequate estate plan is to make a thorough inventory of all your assets. This includes real estate, vehicles, stocks, artwork and other valuables.
Once you have an accurate list of assets, you need to understand how they are titled. Some property and assets may pass through probate while others do not.