Life insurance is an investment in the financial future of those who rely on you. It helps them replace lost income, pay off debt, and avoid estate or inheritance taxes.
The best life insurance companies provide various options and excellent customer service. You can find the top picks by asking friends and family and checking out consumer ratings.
Peace of Mind
Imagine the peace of mind that comes with knowing your family will be financially secure when you’re no longer with them. Life insurance helps pay off debt, provide an income to your family, cover funeral costs, and more.
In fact, according to research, 44% of families would experience life insurance providing a safety net for their family to maintain their lifestyle in case of the primary wage earner’s death within six months.
To determine the right life insurance, consider working with a financial professional to assess your coverage needs and explore options.
Tax-Free Death Benefit
Generally, beneficiaries won’t have to pay income or inheritance taxes on a death benefit payout. It is because a life insurance payout is considered reimbursement for a loss, not income, as the beneficiary will use the funds to cover designated expenses.
Most permanent policies (like whole and universal life) have a cash value component that grows tax-deferred until you withdraw or die. However, if you start from this part of your policy, the amount you draw may be subject to income taxes.
The best way to avoid paying taxes is to keep the death benefit payout as a lump sum. It will help to ensure that the payout won’t increase the size of your taxable estate and trigger federal and state estate/inheritance taxes.
Tax-Free Cash Value
In addition to a death benefit, most permanent life insurance policies offer a cash value savings component that accumulates on a tax-deferred basis. The cash value of whole life insurance grows each year on a schedule guaranteed by the carrier. It may also be supplemented by annual dividend payments (payments that the insurance company shares with policyholders from their profits).
This tax-advantaged cash can benefit you while you’re alive, such as reducing premium payments or helping pay for long-term care. It can also help finance a down payment on a home or supplement your retirement income.
While money borrowed or taken from the policy’s cash value is generally not taxable up to your cost basis, it will reduce the available cash surrender and increase the chance that the policy will lapse. You can consult a financial advisor to understand tax laws for your situation. Their expertise will enable you to make informed decisions and maximize your economic potential.
Dependability
When it comes to life insurance, many individuals want to ensure that their family, loved ones, and business will be taken care of after they pass away. It is a great way to prevent a financial disaster and spare beneficiaries from having to sell the family home, pay off student loans, or balance credit card debt.
When shopping for a policy, compare quotes on an apples-to-apples basis by considering policy term length, coverage amount, and unique features.
Most Americans feel they need life insurance, and there is a gap between those who have it and those who don’t.
Coverage for Term & Whole Life
If you need life insurance for a short period, term life is an affordable choice. It offers coverage for a set number of years, and if you die during that time, your beneficiaries receive the death benefit. Whole life is a more expensive option, but it covers your entire lifetime. The policy has a cash value component that increases gradually over time. You can borrow against it without a credit check or formal underwriting.
Many term policies offer the option to convert to a permanent policy for a specified time, usually without taking a medical exam. It can help you avoid a higher premium as you age, allowing you to choose coverage that suits your unique needs.
