Life Insurance: What You Need to Know

Life Insurance: What You Need to Know

Educational purposes only please do your research and contact a professional to guide you through the process when you hear a conversation about life insurance what comes to your mind is the impending loom of death or the inevitable fact that you need life insurance coverage allow me to ease your mind that even though life insurance is about death it also covers some other aspects it helps to look after you or family members by covering for them in case of accidents or sudden death although the conversation of having life insurance may not be one that you want to have it has benefits that certainly outweigh not having one you might already be aware of the monetary benefits the life insurance offers to beneficiaries when something happens to the insured party and you might also know that your insurance policies can be used as a method for financial planning

but did you know that there are some other benefits that you could be qualified for when you purchase a life insurance policy the truth is investing in life insurance policies could be one of the most important decisions you make for your family in this video we will be looking at six things to know about life insurance number one tax-free death benefits one thing that you may not know about a life insurance policy is that the death benefit is typically tax free most people usually ask about the income tax burden of life insurance benefits but the answer is that there is no tax a life insurance death benefit is the sum of money that a beneficiary receives when the policyholder passes away the beneficiaries could be a person or multiple people such as your children or spouse when a beneficiary of a life insurance policy receives the death benefit the money received is not counted as taxable income and the beneficiary does not have to pay any taxes on it and this is the biggest advantage that life insurance offers this way when a beneficiary receives the death benefit

but your life insurance is outside of a will and life insurance beneficiaries are final after you pass so if you have a major life change or a preference change be sure to update your beneficiaries this is because a life insurance beneficiary receives the payout when a person dies regardless of what the will says the person named in the will is only entitled to the property included in the will meanwhile if a policyholder names his or her estate as the beneficiary it can allow the will to control who gets the life insurance but typically the life insurance policy is not part of the will and the policy amount is paid to the beneficiary of the life insurance not the will number four you can access benefits early you may not know this but you as the policyholder can benefit from your life insurance even when you’re not dead but you can only benefit from it when you are terminally ill there are many insurance policies that allow you to tap into a portion of your available death benefits so that you can pay for medical expenses

this provision however is called accelerated death benefit rider because it is an additional insurance product that gives you early access to your death benefit only if you have been diagnosed with a terminal illness and have been given a short time to live this accelerated death benefit rider allows you to be able to pay for your hospital bills or just gives you the financial freedom to put your affairs in order depending on your insurer or policies you can enjoy the accelerated death benefit rider at no cost or some extra charges but usually it is included in your policy at no extra cost to you so be sure to check with your insurance company some insurance companies can allow you to withdraw up to 50 of your death benefit but with each insurer the amount may vary however if you withdraw from your death benefit payment early it will reduce the amount of money that your beneficiaries will get from your policy after you pass this is why it is prudent for you to use your savings to take care of your hospital bills if you have one instead of withdrawing from your death benefit number five life insurance coverage can be cheap many people are of the opinion

that life insurance policies are expensive while some policies can be expensive there is some affordable life insurance so why won’t you get covered life insurance rates or premiums are primarily based on life expectancy this means that the younger and healthier you are the cheaper your premiums are however each insurer has its own evaluation process and how they weigh factors differently some of the things that ensures access when setting your rate include your age your gender smoking status health family medical history driving record and occupation and lifestyle nevertheless the average cost of life insurance is 27 dollars a month you can also find cheaper policies for as low as 15 a month for young healthy applicants however the cheapest life insurance policies are usually the term life insurance policies that offer protection for a specific number of years but it doesn’t have a cash value and you won’t have coverage once the term ends but still a 25 year old or a 40 year old might be able to get a 20 year 500 000 term life policy for 20 or 30 dollars every month

keep in mind the life insurance rates can vary dramatically among applicants policy types and insurers but they can be cheap and affordable number six life insurance can be modified one might think of life insurance as rigid and inflexible but as mentioned earlier you can switch or convert to different types of levels of coverage there is even a flexible premium life insurance that allows policyholders to adjust their monthly premium to suit their budget or based on their income the flexible premium life insurance is also called adjustable life policy and it gives the policy holder the option to adjust premiums and length of coverage without having to change policies obviously before you make the decision to add or drop coverage make sure you understand all the details and contact a professional the best thing is to check with your insurance company so that you don’t make any mistakes however life insurance can be modified enough to allow you to switch to a different coverage or adjust your premium to suit your income and your budget so tell me which of these points did you not know about life insurance you can share your thoughts with us in the comment section.

they can use the money however they deem fit typically this money could be used to pay for some funeral expenses or even debts as a policy holder when you purchase life insurance you are purchasing a policy for the death benefit this means that if you choose to buy a ten thousand dollar or a one million dollar life insurance policy your death benefit is ten thousand dollars or one million dollars and this is the amount that the insurance company agrees to pay when you pass away you should also know that although the death benefits are tax-free that only happens when you receive the money as a lump sum there are other payout options such as annuity installments or retained asset accounts that might attract taxes but if you receive the amount as a lump sum then you receive the full amount free from tax number two term life can switch to permanent life a common life insurance question that many people have asked is what’s better term or perm however the appropriate answer lies in why you are buying a particular coverage term life insurance also known as pure life insurance is the least expensive and simplest insurance with term life the insurance company establishes

the policy premium on the likelihood that the policy holder will die within a stated term this term could be between 10 20 or 30 years nevertheless the term life can be renewed for another term once the term expires or the policy can be converted to permanent life insurance permanent life insurance does not have a stated term it lasts from the time you buy the policy to the time you pass away just as long as you pay your required premiums you can choose your desired coverage based on why you need it with term insurance you could be looking for coverage that is intended to cover the expenses of raising your kids because eventually they will become financially independent within a stated term but if you happen to be in a situation where permanent coverage seems more reasonable than your current term insurance then switching may be your answer fortunately many term policies offer the ability to switch a term policy to permanent coverage

however you must check with your insurer concerning the rules deadlines and costs that are associated with making such a move but keep in mind that the key to choosing either the term insurance or the permanent insurance is finding a solution that meets your duration and insurance needs number three beneficiary supersedes the will many people may not know this but the beneficiary of your life insurance supersedes whatever is written in your will your life insurance beneficiary is the person you choose on your policy to receive the life insurance payout after you pass away interestingly your life insurance beneficiary may not be the same person as the one you appoint in your will however to make things easier make sure your legal will and your life insurance beneficiary arrangements match a will controls what happens to your assets such as your investments real estate bank accounts and possessions

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