The many benefits of life insurance go far beyond merely providing financial aid to your loved ones, it also serves as a crucial safety net, ensuring that your family is well taken care of in the event of your unexpected demise.
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Other benefits include cash value, paying off outstanding debts, medical bills, and living expenses. You can add extra protection like critical illness cover, which offers you a cash sum if you experience a critical illness. It can also be a backup plan if you must take time off work to recover. Thereby, providing you with the funds needed to offset your bills without exhausting your savings.
Even so, if you are interested in the benefits of being insured through a life insurance policy, you may have questions like, do I need life insurance, or why must I get life insurance? Rest assured you’re right on track with this article. To grab all the benefits, let us delve into the key benefits.
7 benefits of life insurance
Life insurance policies are designed to meet your specific needs. But getting to know the details of the need will motivate you to overcome your doubts and obtain one. The following are the top seven benefits of life insurance that makes it a compelling option:
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Tax-free payouts
When your beneficiary receives a lump sum death benefit due to your demise, your beneficiary is not obligated to report the money while filing their tax return. This is so because life insurance payouts are not taxable except when your beneficiary chooses an installment payout option, which attracts a tax from each interest received.
Furthermore, if you owe some estate taxes, you can offset some or all of them with your life insurance to help relieve your heirs from the burden and pressure of liquidating assets or paying them out with their inheritance.
Also Read: How Critical illness insurance works
Coverage for chronic or terminal illness
Some policies offer you the privilege of access to funds while you are still alive, to help pay for your medical bills. The approach is known as riders or endorsement. Before passing away, you can add or adjust your policy and equally access your benefits at any time.
Supplementing your retirement savings
If you purchase a universal, whole-life, or variable life insurance policy, your funds will accumulate steadily over time. The growth is usually at a guaranteed rate, but the policy provider will determine it. Most importantly, until the cash is withdrawn, there will be no accrued income taxes on the cash value.
Policy loan
Most insurance companies offer you loans at affordable rates. So you can borrow against your cash value, which is not subject to income tax, but this must be while your policy is yet active.
However, the insurance company will charge interest on your loan amount until you receive your refund. This is equally an excellent way to offset some bills or financial pressures without touching personal funds.
Funding tuition costs
An accidental demise could expose your children to becoming school dropouts. Therefore, an education plan is a perfect way to ensure your children’s tuition fees are covered well while you’re out of sight.
Funeral cost
The loss of a loved one is a grieving event in which family members may not have the financial capacity or time to source funeral funds at the moment. It would be a great relief if there were a life insurance plan before the incident, this provides them with comfort, knowing that funds for funeral and other expenses are available.
Legal contract
The law recognizes an insurance policy as a legal contract between you and the insurance company; this should give you a sense of security and confidence in your financial planning.
Therefore, whether you will receive the benefits and rights promised by the insurance company is not an issue, as the government will provide protection and support.
Also, ensure you correctly understand your legal policy to help you avoid disagreements or problems with your insurance company in the event of loss.
Conclusion
To wrap it up, Even when you’ve decided to preserve some other inheritance for your family or loved ones, you can not overlook the benefits of life insurance as it is also a trusted and safe means for creating an inheritance for them. It is an excellent way to provide and protect your loved ones from financial crises in your absence.
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