Understanding the Two Main Types of Life Insurance
When asked about life insurance, most financial experts will tell people that this form of coverage is one of the most important components of solid financial planning. The following instances outline some of the biggest advantages of life insurance.
Life insurance replaces income for surviving family members or dependents. If a person has people who depend on his or her income, it is important for that individual to have a plan to continue providing for dependents in the event of an untimely death. This is especially important for families with young children and a spouse who stays at home to care for them. It can also be important for couples. If one person earns more, the survivor would face financial hardship in meeting monthly obligations. In addition to this, people who provide financial support to their aging parents should also purchase life insurance to make sure they receive the continued support they need.
Life insurance builds an inheritance for heirs. For those who want to pass something on to heirs but do not have many assets, life insurance is an easy way to do that. By naming specific heirs as beneficiaries, the named individuals will receive the money the policyholder wants them to have.
Life insurance pays for final expenses. With the price tags of most funerals hovering close to $10,000, it is important for every person to have at least enough life insurance to cover final costs. These can be burdensome to survivors, but life insurance makes it easy for family members to pay probate costs, administrative costs and funeral expenses.
Life insurance covers death taxes. In today's world, even death is taxed. It is taxed at both a federal and state level. Without life insurance, survivors would have to sell the deceased's assets to try to pay for these costs. In some cases, they may have to take a smaller inheritance instead. However, life insurance can be put in place to cover these costs and take the burden off of survivors' shoulders.
Life insurance builds savings. There are types of life insurance that yield a cash value. If this amount is not paid out as a death benefit, it can be withdrawn or borrowed by the policyholder. In addition to this, the interest is tax deferred. For sums paid out as death benefits, the interest is tax exempt.
Life insurance makes charitable contributions possible. If policyholders name charities as beneficiaries on their policies, they can provide larger sums than they may have otherwise been able to out of pocket. Many single people who do not have surviving family members to name as beneficiaries choose this option to leave a positive mark on the world.
Life insurance is something that can benefit any adult regardless of age, marital status and family status. To learn more about what options best fit individual needs, discuss concerns with an agent.