The benefits of life insurance: A comprehensive guide

Business News | 18 Oct, 2021 |

As of right now, a little more than half of all Americans have at least some kind of life insurance.

This is great news for those who have taken out life insurance policies. It means that they can take full advantage of the many benefits of life insurance.

But it’s also a shame to hear that just as many Americans have put off buying life insurance for one reason or another. These people aren’t able to access the life insurance benefits that are available to so many others. Perhaps they don’t realize how affordable it can be, or they think they are ineligible because of citizenship or criminal history. However, you can, in fact, buy life insurance for prisoners and for undocumented immigrants.

If you fall into the second category, you should think about trying to buy a life insurance policy ASAP. By doing it, you’ll get to start enjoying all of the benefits of life insurance in no time.

Today, we’re going to break down some of the benefits of life insurance for you so that you can see what makes life insurance policies so important. Regardless of what age you might be, buying life insurance is a smart idea.

Discover more about the benefits of life insurance below.

Provides Your Beneficiaries With a Lump-Sum Payout in the Event of Your Death

If you die while you’re still covered under a life insurance policy, your beneficiaries will receive a lump-sum payment shortly after your death. The total amount of this payout will depend on your specific policy terms. But more often than not, most beneficiaries will receive hundreds of thousands of dollars, if not more.

Obviously, this money is not going to be able to replace you in any way. But it will lift a heavy burden off their shoulders by preventing them from having any financial concerns caused by your death. This is one of the biggest benefits of life insurance.

Allows Your Beneficiaries to Collect a Payout Without Paying Taxes on It

One of the things that many people still worry about when it comes to life insurance payouts is the tax ramifications associated with them. They’re sometimes concerned about how much they’re going to have to pay in taxes on a life insurance payout.

You’ll be happy to know that life insurance payouts are completely tax-free. Your beneficiaries won’t have to send a single penny to Uncle Sam after receiving a payout from your life insurance company.

Your beneficiaries are going to be so happy to hear about this if they ever collect a life insurance payout on your behalf. They won’t have to stress out over how much they’re going to owe to the IRS when April comes around.

Gives Your Beneficiaries the Money They’ll Need to Pay Funeral Expenses

When a loved one dies, a family will typically hold a funeral for them. They will then either bury them in a cemetery or have them cremated at a crematory.

Either way, staging a funeral for someone and then burying or creating them is not going to be cheap. The average funeral costs change from one state to the next. But it’s not uncommon at all for families to pay well over $10,000 for the funerals of their loved ones.

Your family might be in a position where you can fork over that kind of cash for a loved one’s funeral services without a problem. But there are many families out there who don’t have the means to shell out that much money for a loved one’s funeral.

Life insurance policies are a godsend for these families. They provide them with more than enough money to cover their loved one’s funerals so that they don’t have to dig themselves deep into debt to do it.

Sets Your Beneficiaries Up With Enough Cash to Cover Living Expenses

Most life insurance experts will tell you that the life insurance policy you take out should be worth anywhere from seven to ten times whatever your income is. They recommend this because it provides your beneficiaries with more than enough money to cover living expenses in the event that you die and aren’t around anymore to help cover them yourself.

Many times, families wouldn’t be able to afford to maintain their lifestyles after a loved one’s death without life insurance payouts. They would be forced to move out of their homes and make other major changes as a result of their lower incomes.

Life insurance can prevent you from ever finding yourself in this kind of situation. You won’t have to worry about seeing your life getting turned upside-down due to the death of a loved one.

Puts You in a Position to Get Long-Term Care If You Ever Need It

Up until this point, we’ve focused primarily on how life insurance policies will help the beneficiaries of those who take these policies out. But it’s definitely worth noting that the policies can also benefit the people who put them into place as well.

There are usually riders that you can add to a life insurance policy when you take it out. Many of these riders are designed to benefit you as opposed to your beneficiaries. You should try looking for life insurance policies that will allow you to add these kinds of riders if you want.

One such rider revolves around long-term care. If you ever have to obtain long-term care benefits for yourself, you’ll be able to get them when you have the right life insurance policy in place.

There are separate long-term care insurance policies that you can take out for yourself. But they can be very expensive in many instances and not always worth the price that you’ll pay for them. Adding a long-term care rider to a life insurance policy could be a more cost-effective option for you.

Lets You Collect a Portion of a Death Payout If You’re Diagnosed With a Terminal Illness

There are about 2.8 million people who die in the U.S. every year. Many of these people die unexpectedly without any warning. But some of them also die after being diagnosed with terminal illnesses.

If you’re ever diagnosed with one of these illnesses, it’s obviously not going to be a cause for celebration. But you will take some comfort in knowing that you can utilize the living benefits that are included with many life insurance policies.

These living benefits may provide you with a chance to receive a portion of your death payout in advance if a doctor tells you that you have less than 12 months to live. You can then use this money to make the remainder of your life as comfortable and as enjoyable as you possibly can.

You can also use the money to help your family as they work to wrap their heads around what the future will hold for them. It will make your terminal diagnosis just a little bit easier on them.

Serves as a Source of Income for You If You’re Ever Disabled

If you would like to add a critical illness rider to a life insurance policy, you’re free to do it. It’s an excellent option for those who worry about what might happen to them if they’re ever stricken by an illness that prevents them from continuing to work.

You won’t have to be concerned about what you’re going to do after having a heart attack or getting diagnosed with a treatable form of cancer. You can continue to keep a steady income coming in thanks to the benefits of life insurance while also working on improving your health.

You can also stop medical bills from piling up and ruining your quality of life. It’s why you should seriously consider utilizing this rider when you first sign up for a life insurance policy.

Permits You to Supplement Your Retirement Savings in Some Cases

To be clear, it’s not usually a fantastic idea to rely on a life insurance policy as your primary retirement fund. It’s not going to deliver the funds that you’ll need to enjoy your golden years.

But there are some people who have figured out how to use their life insurance policies to supplement the retirement savings that they have. You might even be able to use your life insurance policy to reduce the amount of taxes that you have to pay once you retire.

It would be worth speaking with your accountant and/or your insurance broker for more information on how you can do this. It’s not going to work for everyone, but it could be a good strategy for those who are able to play their cards right.

Gives You an Opportunity to Insure the Lives of Your Young Children

You can, of course, purchase separate life insurance policies for each of your children. You might want to do this simply to emphasize the importance of life insurance to your kids.

But you’re not required to obtain life insurance policies for your kids. So rather than buying them their own policies, you may want to consider adding them to your own policy. You can do this without spending a fortune, and you can provide your own family with the life insurance coverage that they need in the process.

This might be something that you and your spouse will want to discuss at the very least. It’s always good for parents to have discussions about both their own life insurance policies and the life insurance policies that they might want to purchase for their children.

Provides Both You and Your Family With Peace of Mind

Stress has turned into a major health issue over the course of the last two decades for many Americans. It has quite literally started to kill a lot of people as a result of the physical health problems that those who are stressed out can have.

If you find that you’re almost always stressed out and that stress is starting to take a toll on your physical well-being, you should do something about it. You can begin by eliminating some of the most common stressors in your life.

Money is typically something that lands at the top of the list for many people when it comes to stress. They worry about everything from not having enough money right now to their families not having enough money if something ever happens to them.

You can get rid of this source of stress by purchasing a life insurance policy. You’ll feel the weight of the world come off your shoulders because of the peace of mind that a life insurance policy will provide to you.

Your family will also enjoy the peace of mind that comes along with the benefits of life insurance. You’ll wonder why you didn’t decide to sign up for life insurance so much sooner after seeing what it can do to reduce your stress levels.

There Are So Many Great Benefits of Life Insurance in Store for You

Now that you know about the many benefits of life insurance, you should start looking into signing up for a policy for yourself. You can start to enjoy these benefits from the second your policy goes into effect.

Just make sure that you inquire about the different types of life insurance when signing up for a policy. The type of life insurance that you get should depend on your age, your health, your budget, and more.

You should make sure that a life insurance policy is going to set you up with enough coverage, too. It might not do you much good if it doesn’t have the necessary terms in place.

Would you like to learn more about life insurance? Or would you be interested in finding out more about the other types of insurance you should consider getting? Look for additional information on insurance-related topics by browsing through the rest of the informative articles found on our website.

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