Life insurance can be critical for financially protecting your family in the event of a disaster, yet many individuals do not have it.
According to a 2021 survey, about half of the American adults do not have life insurance.
One reason is that people believe life insurance is prohibitively expensive.
When asked to estimate the cost of a $250,000 term life policy for a healthy 30-year-old, for example, the majority of survey respondents estimated $1,000 per year or higher.
In reality, the average annual expenditure is closer to $160.
The Benefits of Life Insurance
Life insurance offers a variety of important advantages. Among them are:
1. Life Insurance Payouts Are Tax-Free
If you have a life insurance policy and die while it is active, your beneficiaries will get a lump sum death payment.
Life insurance payouts are not taxable income, and your beneficiaries are not required to record the money when they submit their tax returns.
2. You Can Get Coverage for Chronic and Terminal Illnesses
Many life insurance companies provide endorsements, also known as riders, that you can add to your policy to supplement or modify your coverage.
Under certain conditions, an accelerated benefits rider permits you to access some or all of your death benefits.
Some policies, for example, allow you to access your death benefit while you’re still alive to pay for your treatment or other expenses if you’ve been diagnosed with a terminal illness and are projected to survive fewer than 12 months.
Also read: 4 Important Insurance Policies You Should Have in 2023
3. Your Dependents Won’t Have to Worry About Living Expenses
Many experts advise carrying life insurance that is seven to ten times your annual income.
People who rely on your income should not have to worry about living expenditures or other big charges if you have a policy (or policies) of that magnitude.
For example, your insurance policy may cover the cost of your children’s college tuition, eliminating the need for them to obtain student loans.
4. Life Insurance Can Cover Final Expenses
As of 2021, the national median cost of a funeral that includes a viewing and burial was $7,848.
Due to the fact that many Americans do not have enough funds to meet even a $400 emergency bill, having to pay for a funeral can be a significant financial burden.
If you have a life insurance policy, your beneficiaries can utilise the money to cover your funeral expenses without having to dive into their own assets or take out a loan.
5. Policies Can Supplement Your Retirement Savings
In addition to paying death benefits, a whole, universal, or variable life insurance policy can accumulate cash value.
You can utilise the cash value that accumulates over time to meet expenses like purchasing a car or making a down payment on a home. You can also use it throughout your retirement years if necessary.
A life insurance policy, on the other hand, should not be used in place of standard retirement plans such as a 401(k) or an IRA.
Furthermore, cash value life insurance is much more expensive than term life insurance, which has no savings component and only provides a death payment.
Final Thoughts
Life insurance isn’t just for wealthy people. Life insurance, regardless of your income level, can ensure that your loved ones can make ends meet if you die. Furthermore, life insurance may be less expensive than you believe.
