Life insurance can be very important in the following situations:
- Replace income for dependents
If loved ones depend on your income, life insurance can provide that income for them if you die. Usually parents with young children purchase life insurance. However, couples and dependent adults can also benefit from life insurance. Insurance to replace your income can be especially useful for your dependants.
- Pay final expenses
Funeral and burial costs, probate, estate administration costs, debts, and other medical expenses can be significant. Life insurance can reduce the burden felt by your family to pay these expenses.
- Create an inheritance
Even if you have no other assets, you can create an inheritance by purchasing a life insurance policy and naming your heirs as beneficiaries.
- Pay federal and state “death” taxes
Life insurance benefits can also pay estate taxes. Changes federal and state death tax laws may increase the amount of taxes owed.
- Make a charitable contribution
If you name a charity as the beneficiary of your life insurance policy, you can contribute more than the cash equivalent of the policy’s premiums.
- Create a source of savings
Some types of life insurance have a cash value. If the insurance is not paid as a death benefit, it can be borrowed or withdrawn. Buying a cash-value type policy can create a type of savings plan.
Term & Whole Life Insurance
There are two main types of life insurance: term and whole life. Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions. Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100!
Learn More About Life Insurance
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