Life insurance ensures the financial security of your family when you die. The main aim is to support them ahead when you are not there anymore. The pay-out can be in form of a cheque, cash payment or a bank transfer that is not subjected to any kind of taxation.
Cash is just a term; life insurance with its numerous benefits helps the dependents in many ways. It is there to replace the lost income to help beneficiaries cope up with what comes next. Covering the funeral costs is one of the many benefits of life insurance. Funeral Expenses are the first thing your loved one encounter right after your death and they can cause havoc in your budget.
People are generally unprepared for such type of expenses and have to spend from or savings. In some cases, the situation can lead up to loans and debts as well. Since the 1970s, the rate of funerals has been increasing. The burial plots cost a lot more now because of the increasing population.
Funeral homes charge more because of the overall market inflation. All such factors have led to the increased price of funerals. Therefore, having an insurance backing you up will save your family from running around on a funeral.
Next comes the living expenses after you are gone. When there is no income to live on once you are not there, what shall they do? A lump-sum amount can be used in many ways when invested properly or used economically keep the financial conditions stable. There can be many other instances when your family has to pay the mortgage or college fees. A thousand expenses boil up in your budget when speaking practically and how to get through it all?
Life Insurance and the benefits that come along can be the best way around it. Nobody wants his family to change his lifestyle once he dies. You want to have them all the comforts and colors even when you are not there for them. The final benefit may not be very much but it may be enough to keep them above the surface till the time a permanent source of income is devised.
Life insurance is mostly about financial benefits to keeping your dependents protected and contented. The earlier you apply for the insurance, the better chances of surviving they will have. It doesn’t matter really if you are too late. You can still generate enough funds to cover the end-of-life expenses and the funeral costs.
Insurance experts generally recommend to sign up for a death amount that is 10-15 times more than your average salary to maximize the benefits of life insurance. In other words, your family will get 10 to 15 months to settle in for an income replacement. The death benefit may help the beneficiaries to pay for:
- Rent or Mortgage costs if you do not own a house
- Expenditures like college expenses, car maintenance costs and credit card payments
- Saving up for the University education
- Routine expenses life grocery, clothing and transportation
- Income replacement in case you are the sole provider in the family
The tax exemption makes the insurance money easy to be used anywhere. The insurance company does not restrict the beneficiaries to use it for some specific task.
Whole Life Insurance and Benefits
Whole Life Insurance is a permanent life coverage that consists of a cash value component along with the final benefit. You need to pay the premiums or have enough cash value that may serve as an alternative to the premium payment, you will have your coverage once you die.
Whole Life Insurance is more expensive than term insurance but the benefits of this life insurance are more. The policyholder gets a cash value component in addition to the death benefit. The cash value component may grow up gradually serving as an additional investment. The dependents can plan further and better when they have a side investment waiting to be dislodged.
The cash value component gives the policyholder the option to withdraw or loan out money. However, high administrative fees associated with the withdrawal may decrease your final benefit.
Term Life Insurance and Benefits
Term Life Insurance lasts for a selected number of years and the benefits of life insurance are suitable to most of the people. The premiums are low, thus making it more affordable than other permanent life coverages. Most insurances have risk assessments and as you age, the premiums go higher every year. In term insurance, the policy is active on the number of years you have selected so the risk factor is less and hence, premiums are cheaper.
If you sign up for this insurance at an early age, you might even get lower rates than usual. The term insurance doesn’t return the cash value component. Hence, you can get more on the final benefit by investing more. In case you choose to abandon the policy, you’ll have to lose all the premiums you have paid. There are no additional repercussions except for that.
Life Insurance Riders and Benefits
Riders are an innovation to the benefits of life insurance and make your family more secure. They provide extra coverage in addition to the standard coverage provided in the policy. Riders are add-ons that can be taken up with a policy just like pizza toppings. You need to know some of the riders before you enter the market to buy an insurance policy:
- Disability income
This rider serves as an alternative to long term disability insurance but only lasts for a short term. Disability income is provided in case the policyholder becomes disable or is somehow unable to earn for himself. Due to his condition, the insured is provided with a stipend every month for a specific amount of time to cover his expenses.
- Term Conversion
This rider is specifically for the people who have opted for Term Insurance. The rider gives them an option to convert their term insurance into permanent life coverage.
- Long Term Care
The rider is for people whose health deteriorate very quickly and require long term nursing. The healthcare is provided by the respective company through the money taken out from the death benefit of the policyholder.
- Disability Waiver
This rider waives off your premiums if you become disabled. This rider is a great add-on to suit with your insurance policy. Nobody knows how life turns out and keeping your options all open is the best strategy to adopt. With this rider, your insurance policy is not affected even if you are not paying your premiums.
- Accelerated Death benefit
The rider helps you get your death benefit paid out to you in case you are left with less time to live. People generally suffering from terminal illnesses are given a specific term of survival. The insurance company makes sure they pay you the death benefit to cover all the expenses while you are in the hospital struggling and ease off the burden on your family’s shoulders. However, the family may get lesser benefit compared to before depending on how much of it is used.
How do I know if I need life insurance?
It’s simple really. You need life insurance in case you are supporting someone. That someone could be your wife, children, parents or anyone at all, anyone you can think of that will be in trouble when you are gone. You can go for life insurance even if you are not the primary breadwinner in the family.
Stay-at-home parents can get lonely and open suddenly in case you have not left an outsourcing option for them as a backup. The only consistency needed on your part is regarding the premium payment. People generally lack the will after some time and abandon the policy. If you want good results, you need to put in good results. The same goes for the insurance policy and its benefits. You need to be a little hard now to have a better future for your family.
As the market prices are inflating, the need for insurance is becoming more vital. People are generally confident that their savings will be enough to lead their family through the time of crisis. That is not always the case. There are hidden bills, loans or debts that are to be paid off and may leave your family exposed. Also, your estate is subjected to a tax filter leaving little behind and disrupting everything you had planned.
The insurance benefit paid at the end is exempted from taxation charges and served your family’s best interests. In some cases, people also need money before they die. They have an innate feeling of compensating the end-of-life expenses on the off chance they occur. That is why they choose policies that pay out the death benefit to cover the expenses while they are alive and letting them off with a sigh of relief. Such benefits of life insurance make the people feel more secure and lively.
The riders that come along are a cherry on top of the cake. You may choose a rider if you have some specific condition and need to be covered along with the standard insurance. The riders are dependent on your needs and they come if you choose them. You also have the option to cancel the policy anytime if things are burdening you on the cost of the premiums, at the least.