In 1980, a North Carolina woman took out a whole life insurance policy to cover herself and a term life insurance policy to cover her husband.
Nine years later, when her husband died in an accident, this woman was left with two young daughters in private school and a massive mortgage covering a half-built, unsellable house, as well as funeral expenses and lawyer fees for executing her husband’s estate, and not even to mention the everyday costs of raising a young family: school, groceries, child care, saving for college tuition. Furthermore, this woman had been stay-at-home mom since the birth of her older, nine-year-old daughter, and would find it near-impossible to find work in her small town without having to leave her children to go back to school or to night classes.
Fortunately, she was able to claim on her life insurance. She was able to use her husband’s term life policy to sustain their family until her youngest started high school and she was able to retrain and return to work on her own terms.
Without life insurance, which can be as cheap as $50 a month for whole life cover worth up to $1 million, she would have been forced into low-wage work or night school, her children would have been forced to move schools and the family would have been devastated by the massive mortgage they had taken out to build their own home.
Life insurance is a must for families with children in order to provide stability and comfort to a family should the worst happen. Not only this, but life insurance has many advantages that are not offered by any other financial instrument. Read on to find out more about the advantages and disadvantages of investing in a life insurance policy.
- The main purpose of life insurance is to provide an infusion of cash to ease the adverse financial consequences of the insured’s death. This covers funerals, lawyers to help executed the insured’s estate and usually a pre-agreed amount of money to cover everyday expenses such as school and tuition fees, mortgages, bills and groceries.
- Not only this, but the money provided enjoys favourable tax treatment not offered by other financial instruments, including income-tax and estate-tax-free death benefits and policy loans, as well as cash values which grow tax deferred during the insured’s lifetime and cash value withdrawals that are treated on a first-in-first-out (FIFO) basis, thus allowing withdrawals up to the total premiums paid to be income-tax-free.
- A life insurance policy may be exchanged for another life insurance policy or annuity without incurring the current taxation. However, it should be noted that while these statements are true, the tax benefits of life insurance have limitations which can cause the benefits mentioned to be lost under certain unfortunate circumstances. This should be discussed with your insurance and tax advisor. (However, it should be noted that while these statements are true, the tax benefits of life insurance have limitations which can cause the benefits mentioned to be lost under certain unfortunate circumstances. This should be discussed with your insurance and tax advisor.)
- Furthermore, many life insurance policies have incredible flexibility and are therefore maintain the ability to adjust to the policyholder’s needs upon request. This allows for the death benefit to be decreased if necessary and premiums to be easily reduced, skipped or increased if this is necessary.
- And finally, a cash value life insurance policy is considered to be a tax-favored source of liquefiable funds should the need arise. Meanwhile, the assets backing these funds are generally held in longer-term investments, and thereby earning a higher return and providing finically stable support.
And while life insurance does have its disadvantages, they are not many.
- Policyholders may forego some current expenditure to pay tax-free policy premiums, although premiums can be as low as $50 a month, and may be deferred or skipped in certain circumstances and times of hardship.
- Life insurance is typically purchased by the insured for the benefit of their loved-ones, business partners and dependents and so they generally only benefit indirectly from their policy.
- Cash surrender values are usually less than the premiums paid in the first several policy years and may not be recovered if the policy is surrendered, however long-term investments in a life insurance policy from us promises total payback.
- Purchasing and positioning life insurance can be complex, especially when estate planning, businesses and complex family situations are involved, however this can be facilitated by using Best Insurance Specialist.
- Finally, the life insurance acquisition process can be annoying and perplexing and questions can arise, such is the life insurance agent trustworthy? Is this the right product and carrier? How can medical underwriting be streamlined? With us, these are not things to worry about. We reliably offer term both a term life policy and a whole life policy at the best insurance rates, so contact us today to get life cover quotes.