The Benefits of Life Insurance Author:    Posted under: Life InsuranceLife Insurance questions answered

Everyone knows the benefit of life insurance is to protect your loved ones from the financial effects following your death. It is the primary motivation people have for purchasing life insurance in the first place. But all too often we forget life insurance has living benefits too.

The death of a loved one is not only emotionally distressing. If you’re the breadwinner, it will also be financially crippling to the ones you leave behind. As callous as it sounds, not only do they have the tremendous challenge of surviving the loss of your income that they are dependent on, the expenses that come with dying will also come as a complete shock to them.

Mortality statistics show that too many people die before they reach their normal life expectancy annually. When the main provider in a family dies, the survivors’ lives are brought to a standstill. The financial consequences they have to face are often more than they could withstand. Some of these are:

  • Funeral costs – Including but not limited to funeral planning, securing of necessary permits and copies of death certificates, sheltering and transporting of the remains, flowers, obituary notices, ceremony or memorial services, a casket, cremation or interment.
  • Unresolved debts – This may include medical expenses not covered by health insurance, bank loans, housing or automobile loan balances, credit card balances, unpaid income or property taxes.
  • Estate taxes – Federal and state death taxes are more examples of the costs of dying. Federal estate tax rates are progressive – meaning the larger the estate, the higher the taxes get. This tax usually must be paid within nine months of death. State inheritance and estate taxes usually differ.
  • Estate administration – Even the most modest estates may incur considerable administration costs, but generally, the larger and more complicated the person’s holdings are,        the higher the administration expenses are likely to be. This may include but not limited to executor’s fees and executor’s attorney’s fees, cost of appraising the estate property, insurance for the estate property while the estate is open, court or probate costs, cost of defending a will if it is to be contested, repair or maintenance of a property if it is to be sold.
  • Security for the future – If the deceased is the primary earner, the surviving dependents would have to manage without his or her income to pay for bills, food and the mortgage or rent, and expenses related to raising children. If he or she was staying at home to care for the kids, the surviving spouse will have to make great schedule and lifestyle changes to fill the void left by the caregiver, or find someone else to do it for a fee. With the high cost of childcare services, they might not have enough income to afford this. Education for the children who are left behind must also be considered. Most, if not all parents, dream of being able to send their children off to college to finish their degree and get a chance to have a better quality of life. Life insurance can help make this dream a reality, even if the parent is no longer able to see it come true.

Life insurance proceeds are usually payable in full, and how much a beneficiary is paid depends on the policy’s death benefit.

But as mentioned above, life insurance has living benefits for the policyholder while he or she is alive as well.

Some types of life insurance, such as permanent life insurance policies that last for the entire life of the insured, are capable of accumulating cash values. Before the insured dies, this will be able to benefit him. Generally, this kind of insurance policy has higher premiums.

As well, some permanent life insurance policies permit withdrawals from the cash value-money to be used by the policyowner for whatever purpose he may need it. However, the amount withdrawn will be subtracted from the policy’s death benefit. Loans can also be taken out from the insurance company by the insured, using the policy’s cash value as collateral. These loans must be paid in full or any unpaid loan amount and interest will be deducted from the death benefit when the insured dies.

The cash value can be used as additional income and help during retirement. Although life insurance is not the same as an investment, it does offer full payment of the full death benefit and accumulates cash value during the insured’s lifetime.

These are just some of the benefits of purchasing life insurance. If you think about it, there really is great value in planning for the future and for the unforeseen and inevitable circumstances and it is worth considering for your family’s security. One other advantage that is that it gives peace of mind in these times of financial difficulty, and that is priceless.


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