6 Top Advantages of Life Insurance
Life Insurance in Houston
Protection
First and foremost, one primary advantage of life insurance is the death benefit. Dying with no life insurance can create all sorts of financial and emotional problems for those you leave behind.
For example, your family may have to find money for debts, mortgage, bills, funeral expenses, income replacement and more.
There is a huge advantage to having a life insurance policy in force that will pay a death benefit will go to your life insurance beneficiary, which they can use however they wish.
For example, they could pay off the mortgage, replace lost income, or pay off any large debts, such as student loans.
Removes Worries
For the length of your level term life insurance or for the rest of your life with whole life insurance with cash value, you can rest worry free that your family is provided for should you die prematurely.
You see, there really is no replacement for the satisfaction you get once you have life insurance in force and you know your family’s financial needs will be met if you die.
You can choose 10, 20, or 30 year term life insurance. There is even a 35 year return of premium life insurance policy available. Each policy has a conversion option to permanent coverage, and also turns into annual renewable term to age 90 or 95 once the policy expires.
Another option is permanent life insurance which lasts your entire life. Among the many options are:
Whole life insurance which offers
- 10 or 20 limited pay,
- whole life to age 65,
- or whole life to 100.
There is also universal life insurance which includes
- Guaranteed universal life
- Indexed universal life
- Variable universal life
- Survivorship life
Cash Value
Apart from return of premium policies, term life insurance does not have cash value. However, if you were to go for a permanent policy, you will be eligible for cash value life insurance.
Depending on the design of the policy, your cash value will grow over time. By adding certain life insurance riders to the policy, such as paid up additions, you can supercharge the cash value growth.
The advantage of cash value life insurance is that you can use the cash to fund many purchases down the road, such as paying off debt, buying a home, investing in real estate, of simply living off the dividends as a form of passive income.
Advantages of Cash Value Life Insurance:
- Cash value grows tax deferred
- True compound interest as your principle is left undisturbed
- Tax free withdrawals and policy loans
- Policy loans do not have to be repaid; you choose your own repayment schedule and amount
- Policy loans do not show up on your credit report
- Income tax free death benefit
- Living benefits
- Different benefits including accelerated benefits which pay a portion of your death benefit while you are still alive if you are diagnosed terminally ill
- Distributions are not considered in calculating Affordable Care Act taxes on investment income, income taxes on Social Security benefits, or in calculating Medicare premiums.
- Provides an excellent source of supplemental retirement income
- Protected under certain state laws against creditors
Tax Benefits
Not only is a life insurance death benefit not taxable, the cash value accumulation and any dividends accumulate tax deferred. And if you use policy loans you may never have to pay taxes on your cash value growth.
Further, all policy loans are free from income tax, and even most cash value withdrawals are tax-free as long as it doesn’t surpass the premiums paid into the policy, i.e. your basis.
Flexibility
Another advantage of a life insurance policy is that you have great flexibility over what company you choose, the policy, coverage, duration, beneficiary, and more.
Even after you have passed away, most insurers will allow the death benefit to be spent on whatever is required rather than forcing your loved ones to spend it in certain areas.
Depending on the type of policy you choose, after the policy is in effect and has been for many years, there are various things that can be done to adjust, including lowering the premiums. If your income decreases, you might be able to decrease your premiums and death benefit with an option to increase it once more in the future.
Cheap Prices
Finally, we should also mention that life insurance rates are now extremely affordable, particularly term life, thanks to people living longer than ever.
Further, as one company competes with the next, cheap life insurance is in abundance.
And your own decisions will affect the price and this comes back down to flexibility once again.
Source: Termlife2go
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