Why Life Insurance Is An Essential Investment For Your Future

Why Life Insurance Is An Essential Investment For Your Future

Many individuals avoid life insurance because they believe it is too expensive. However, the benefits of life insurance are many and varied.

In exchange for premium payments, a life insurance policy pays a lump sum known as the death benefit to your beneficiaries after your death. This money can help cover debt, expenses and other costs for your family.

1. It Helps Your Family Pay Off Debt

If you have a lot of debt, or even just a significant amount of credit card debt, a life insurance policy can help your loved ones pay it off. The death benefit from your Freedom life insurance can cover the cost of paying off your debt, which means your family won’t have to sell any of their assets or borrow money to do so.

In some cases, your family can use the death benefit from your life insurance policy to pay off the remainder of a mortgage or other debts you have on your property. This can ensure that your loved ones will not be left with an outstanding balance on their home, or other expensive assets, after your death.

You may also want to consider taking out a life insurance policy if you have children who are still in school or in their early 20s. This will allow you to pay off your child’s student loans in case of your untimely death. It will also help ensure that your child can continue to have a good quality of life, and won’t be burdened by a substantial debt.

If you have a whole life insurance policy, it can also help your family build wealth over time and grow your savings account. In addition, it can provide protection against escalating health expenses by offering riders and stand-alone medical insurance plans. This can be especially important given the rising incidence of lifestyle diseases and high hospitalization expenses. The regular payments you make into your life insurance policy will also teach you the habit of saving, which is essential for long-term financial security. Moreover, the premiums you pay into your policy are generally federal income tax-deductible.

2. It Helps Your Family Pay for Education

As children grow older, parents have to start thinking about college costs. This is another area that life insurance can help. Term life policies can help pay for tuition in the event of your death, and they are usually very affordable. Many financial professionals suggest that you buy a life insurance policy while your family members are young and healthy. The longer you wait, the more it will cost and the harder it may be to qualify for a policy later on.

It is also a good idea to review your policy periodically, especially as your children get older and you can make changes if needed. If you plan to use your life insurance to pay for college, it’s important to remember that a 529 savings plan is often a better option. These plans are tax-deferred and can earn investment growth that is free from state taxes if you use the funds for college costs.

The current steep (ok, downright debilitating) cost of college tuition requires families to have a well-thought-out strategy for how to minimize out-of-pocket costs. A permanent life insurance policy that accumulates cash value, like a universal or whole life policy, can be an effective tool for this purpose. This approach has the added benefit of providing you with some flexibility, as the money can be withdrawn or loaned without taxes and does not factor into your financial aid calculations.

It’s worth noting that you can also fund your child’s education using a 529 savings plan and 401K, or individual retirement account. However, a permanent life insurance policy offers some distinct benefits to this end, including its potential for accumulating cash value and the fact that it doesn’t count against financial aid calculations.

3. It Helps Your Family Pay for Living Expenses

A life insurance policy provides a lump sum payout, or death benefit, to your beneficiaries upon your death. This amount can help them pay for expenses like funeral costs, outstanding debts (such as a mortgage) and other living expenses.

When deciding how much coverage you need, consider your current income, future family needs, debt, savings and other financial responsibilities. A financial professional can help you determine the amount of coverage you may need, help you compare options and explain different types of life insurance policies.

Often, the most important reason to buy life insurance is to provide financial security for your loved ones in the event of your death. Typically, it is recommended that you purchase a life insurance policy equal to seven to 10 times your annual income. This ensures that the people who depend on you will have enough money to cover daily living expenses, mortgage, other debts and future education costs without having to take out loans.

If you have children, a life insurance policy can also help to cover child care and daycare fees, so your spouse or partner doesn’t have to shoulder the entire burden. It can even help with other costs that are related to parenting, such as medical bills and nanny costs.

4. It Helps Your Family Pay for Funeral Expenses

Depending on the type of life insurance you have, your beneficiaries may be able to use the death benefit to pay for funeral expenses. This money can also help your family pay for other bills and debts, provide a financial safety net, secure future educations for children and grandchildren, or fund long-term care.

While a final expense policy can be helpful, there are several things you should keep in mind before making a purchase. Unlike traditional life insurance policies, prepaid policies often do not pay out the full amount of the face value at the time of your death. The money is only guaranteed to be available within a certain period of time, and it may not be enough to cover your entire funeral costs.

When you buy a traditional life insurance policy, you can decide who your beneficiaries will be and how they can spend the funds. The beneficiaries can use the money to pay for your funeral expenses, but they can also choose to save or invest it. This option gives your loved ones the freedom to choose what is best for them, while still giving them the peace of mind that comes from knowing you have a plan in place to cover your final expenses.

Some people even opt to have a life insurance policy with a final expense clause that can advance the money from the policy to their chosen funeral home. This can make it much easier for your loved ones to manage the costs of your funeral while dealing with grief. This can also be a much better alternative to relying on a will or Social Security to pay for your funeral.

The cost of funerals is on the rise, and it can be hard for families to afford them without dipping into their own savings or using credit. Life insurance can help your loved ones pay for funeral expenses and other end-of-life expenses, and it’s an essential investment for your future. Unum offers a variety of life insurance plans to meet your needs, from covering funeral costs to paying off debts and other living expenses.