Having a life insurance product is a part of having a good financial plan but few understand the utility of having life insurance beyond providing for their families after they are gone. Although the death benefit is the primary and obvious reason for buying life insurance, there are many other benefits one should consider.
Paying Final Expenses
Funeral expenses are the costs which are incurred in the process of burial or cremation, and this is why the death benefit from a life insurance policy is intended to cater for the costs. This comprises of the hospital bills, funeral and burial expenses, debts, taxes, the probate charges which when added can go well over $10,000. If you do not have enough life insurance, this financial obligation would be shifted to your loved ones when they are mourning.
Income Replacement
For instance, if the breadwinner of a family dies, then the earnings and income that were anticipated are also lost. For the families in which the breadwinner still has to pay for the mortgage, college savings or even daily needs, such a loss of income can be disastrous. A life insurance policy with a high face amount guarantees that dependents are financially secure by providing them with a steady source of income.
Mortgage Protection
If you still owe your creditor some cash, life insurance can also act as mortgage insurance, ensuring that your beneficiaries can pay your home loan balance. This helps them not to face the difficulty of grappling with house repayments on top of funeral expenses and others. It also assists them in avoiding having to sell the family home in order to clear expensive debts.
Wealth Transfer
Another aspect of permanent life insurance is accumulation of cash value that can be accessed while the policyholder is alive. This implies that built up cash value can be used to provide extra income in retirement, to pay for college, for investment or to pass it on to the next generation. Wealth transfer through life insurance might enable you to give property to heirs without taxation or with lower estate taxes.
Business Continuity
If owning a small business one can take a life insurance policy that will enable continuation in case the owner dies. It can help to pay for buy-sell agreements, support operating losses during the transition period after the death of an owner, cover debts to stay open, or search for a replacement in a key position.
Living Benefits
Certain life insurance policies have provisions for accelerated death benefits that enable a policy holder to receive part of the face amount of the policy while alive and suffering from a terminal illness. This can help pay for expensive medical bills and other final expenses that might be incurred at the time.
Policy Loans
Permanent cash value life insurance may sometimes enable policyholders to borrow against the accumulated cash value. The terms are relatively benign when compared to other financing techniques. Loans do not involve credit checks or reporting and may also feature lower interest rates than other forms of credit.
Disability Coverage
Policyholders who receive disability income can sometimes include riders in their policy. In the event of injury or illness that renders a person incapable of working and earning an income, disability coverage through a rider means that there will be monthly cash benefits to meet bills.
Long-Term Care
Likewise, long-term care riders can also be added to policies to assist with the costs of assisted living, nursing homes, home health aides, or adult daycare as you grow older. Given that the average LTC stays for $50-$100+ per day, supplementary insurance can help with the cost of additional care.
Legacy Planning
The payout received from a life insurance policy may also be funneled into an irrevocable life insurance trust (ILIT) in estate planning. It enables you to contribute funds after death to beneficiaries in a protected way that will not attract estate taxes or probate. An ILIT trust is a safe container for wealth transference across generations.
As already mentioned above, life insurance policies have a lot of advantages while you are alive and after your death. One has to get as much knowledge as possible about all the perks, choices and variations in order to properly set up the needed life insurance protection. Speaking with an insurance expert about your individual situations and aspirations will allow the Identification of sufficient policies for safeguarding the people you cherish most. When you have a clearer understanding of these living benefits, you might see life insurance not simply as a means to provide for your beneficiaries after you are gone, but as a way to manage your money.
