5 Top Benefits of Life Insurance

Life insurance is important for safeguarding your family's finances in the event of an emergency, but many people forgo it. In fact, just over half of adult Americans don't have life insurance, as per a 2021 survey. Some folks mistakenly believe that life insurance is expensive. When asked to estimate the cost of an annual term for a healthy 30-year-old, 70 percent of survey respondents guessed $1,000 or more. In reality, the annual cost is estimated to be closer to $160.

Life insurance is a way to protect yourself and your loved ones in the event of your death. Life insurance can help cover funeral expenses, provide financial assistance during difficult times, and provide a source of income for your loved ones. There are several types of life insurance, including term life insurance, whole life insurance, and universal life insurance. 

Key Takeaways

• Having life insurance just isn't an option for nearly half of American adults. 
• They regularly believe they can not afford such coverage. 
• Not only offering protection for their immediate family, life insurance provides tax advantages and other advantages.

5 Top Benefits of Life Insurance

1. Life Insurance Payouts Are Tax-Free

If you have a life insurance policy and pass away while its payout is still in effect, your beneficiaries will receive a lump sum death benefit. Life insurance payouts are not considered taxable income by the IRS, and your beneficiaries do not need to report the amount when they file their tax returns.

2. Your Dependents Won’t Have to Worry About Living Expenses

Many experts advise that you purchase life insurance equal to seven to 10 times your annual income. If you opt for an insurance policy (or policies) of that magnitude, those who rely on your income shouldn't have to fret about their expenses or other major costs. For example, your insurance policy may partially cover the education of your children. This eliminates the need to take out student loans.

3. Life Insurance Can Cover Final Expenses

The median cost of a funeral which included viewing and burial was $7,848 as of 2021. Since many Americans do not have access to sufficient savings to cover even a $400 emergency expense, paying for a funeral can be a substantial debt. If you have a life insurance policy, your beneficiaries can use the money for your burial expenses without having to resort to their savings or use credit. Some insurance companies offer final expenses policies. These policies have low coverage amounts and relatively low monthly premiums.

4. You Can Get Coverage for Chronic and Terminal Illnesses

Life insurance companies offer riders, also known as endorsements, that you can add to your policy to add extra coverage or add to your existing coverage. An accelerated benefits rider allows you to access all or part of your death benefit under certain circumstances. You may be permitted to use any death advantage payments that you receive while still living in the event that you have an expected life expectancy of under 12 months, and must live under this policy. 

5. Policies Can Supplement Your Retirement Savings

If you acquire an entire, universal, or variable life insurance policy, it can generate cash value in addition to providing you end-of-life benefits. As your cash value increases over time, you can use it to cover expenses, such as buying a car or making a down payment on a house. You can also draw it upon retirement. 

A life insurance policy shouldn't replace traditional retirement accounts like a 401(k) or an IRA. What's more, cash value life insurance is substantially more expensive compared to term life insurance, which has no cash value.

Conclusion 

Life insurance is a financial tool that gives peace of mind in the event of an unexpected death. Benefits can include money for funeral expenses, income replacement, and a tax-free estate. There are many benefits to life insurance, and it is important to choose the right policy for your needs. 

Life insurance isn t only for the wealthy. No matter your income level, life insurance can ensure that your loved ones would be able to maintain their own living expenses after you're gone. And when you opt to purchase life insurance coverage.