Let’s find out ‘What Are The 5 Benefits Of Life Insurance?’ Many people don’t have life insurance, which might be crucial for providing for your family financially in the event of an emergency. In reality, a 2021 survey found that nearly half of American adults lacked life insurance.
People’s presumption that life insurance is too expensive is one of the causes. For instance, the majority of survey participants estimated $1,000 per year or more when asked to estimate the cost of a $250,000 term life insurance policy for a healthy 30-year-old. The average price is actually closer to $160 each year. 2
What Are The 5 Benefits Of Life Insurance?
There are many helpful advantages offered by life insurance. They include:
1. Life Insurance Payouts Are Tax-Free
Your beneficiaries will get a lump sum death benefit if you have life insurance and pass away while you are still covered by it. Your beneficiaries don’t have to disclose the money when they submit their tax returns because life insurance payouts aren’t treated as income for tax purposes. 3
2. Your Dependents Won’t Have To Worry About Living Expenses
Numerous authorities advise getting life insurance that is seven to ten times your annual salary. The folks who rely on your income shouldn’t have to worry about their living expenditures or other significant bills if you have a policy (or policies) of that magnitude. For instance, your health plan might pay for your kids’ college expenses, saving them from having to take out student loans.
3. Life Insurance Can Cover Final Expenses
As of 2021, the average cost of a funeral in the country that included both a viewing and a burial was $7,848. 4 It can be very expensive to pay for a funeral because many Americans do not have enough funds to meet even a $400 emergency bill. 5 If you have life insurance, your beneficiaries won’t need to use credit or their own resources to cover your funeral costs. Instead, they can use the money from your policy.
Final expenditure insurance is provided by some insurers. These insurance feature minimal coverage levels and comparatively low monthly premiums.
4. You Can Get Coverage For Chronic And Terminal Illnesses
Many life insurance providers include riders, often referred to as endorsements, that you can add to your policy to improve or modify your coverage. You may use an accelerated benefits rider to access all or a portion of your death benefit in certain situations. Some policies, for instance, allow you to utilize your death benefit while still alive to pay for care or other expenses if you are diagnosed with a terminal illness and your prognosis is shorter than 12 months.
5. Policies Can Supplement Your Retirement Savings
A whole, universal, or variable life insurance policy that you buy offers the added benefit of building cash value in addition to paying death payments. You can use the cash worth that accumulates over time to pay for costs like a car or a down payment on a house as it grows. During your retirement years, you can also draw from it if necessary. 6
However, conventional retirement savings like a 401(k) or an IRA shouldn’t be replaced with a life insurance policy. Additionally, cash value life insurance is far more expensive than term life insurance, which only provides a death payout and no savings feature.
