Life insurance is one of those “things” that most folks with a family understand that they NEED, but sometimes fail to realize just how badly they REALLY need it!
We know this because even within the 55 to 65% of Americans who have life insurance, nearly ½ of those are UNDERINSURED (Insurance Information Institute).
Sadly…
We feel that the reason for this is two-fold. First, many individuals fail to realize just how much life insurance they may need to protect their family’s financial future. Secondly, many individuals tend to ASSUME or FEAR that the cost of the “right” amount of life insurance would be too expensive. For this reason, we wanted to take a moment and discuss what we feel are the Top 10 Benefits of Life Insurance so that we can underscore just how important it is to have.
As well as…
Encourage all of our readers to utilize our “quote engine” so that they can get a better idea of exactly how much a policy might cost them. So, without further ado, let’s dive right in!
Top 10 Benefits of Life Insurance (broken down into groups).
Benefits are designed to help one’s family.
#1. Protect Lost Income.
Imagine for a moment that you lost your job last week. Chances are, you’re taking a look at your current bills, looking at your existing bank account, and starting to look around for a new job ASAP. You may also feel the need to apply for unemployment benefits, which may or may not arrive in a timely manner and are sure to be much less than what you were originally making.
At this point…
Depending on your current financial situation, you may also be thinking about how you might be able to “cut back” on some expenses and avoid any “unnecessary” expenditures. This may include:
- Eating at home whenever possible,
- Discontinuing household non-essentials such as a cable bill or gardening expenses,
- Driving less or combining shopping trips to cut back on gas experiences,
- Etc…
Now imagine if you can’t find a new job right away, and your unemployment status continues for several months. Long enough that even your unemployment might expire! What kind of “cutbacks” would you need to make them?
Would you be able to:
- Keep your car?
- Continue to cover your rent or mortgage expenses?
- Would you need to move?
“Pretty scary, right?”
We think so, but the really SCARY part about this scenario is that this would be the situation your family would most likely experience the day after you passed away with one exception.
That exception being…
That in addition to being put into a horrible financial situation, they would also be burdened with the financial obligation of having to bury you as well!
Horrors…
That could all be avoided simply by taking the time to purchase a life insurance policy on yourself that would account for any lost wages that would occur if you died prematurely.
- Protect a mortgage.
- Protect a spouse or child’s financial future.
- Protect one’s alimony or child support settlement.
- Fund a child’s education
Benefits for one’s self.
#2. Cover the cost of a mortgage.
Another benefit that a life insurance policy can provide is if an individual dies prematurely, they can have a life insurance policy in place that would be large enough to cover any outstanding mortgages he or she may have on their home (or investment properties).
One added benefit…
The reason for purchasing a life insurance policy for this purpose is that as one continues to pay down their mortgage, the amount of money that will be needed from the policy will decrease, leaving more money behind for your family to do whatever they choose to do with it.
This is, of course…
Assumes that your family chooses to use the funds from your life insurance policy to pay off a mortgage, which of course, would be entirely up to them to decide.
#3. Unexpected final expense costs/estate fire sales.
Let’s now assume that you don’t necessarily need a life insurance policy. This may be because you don’t have:
- Anyone financially dependent upon you.
- Significant debts like a mortgage to speak of.
Or maybe you have acquired enough wealth that your family doesn’t require any additional financial security, which is certainly possible. But before someone automatically assumes this to be true. They may want to ask themselves exactly how much of their assets are liquid or immediately accessible. Or, to put it another way, how much cash would your family have before they would be put in a challenging position?
You see…
Dying isn’t always free, and getting buried certainly isn’t, which means that immediately upon your death, your family may be hit with some significant bills. This, coupled with the fact that transferring funds and changing ownership of assets isn’t always the easiest thing to do, often puts a family in an uncomfortable bind—a bind that is often alleviated through a “fire sale” of some assets so that the remaining family members can have some working capital.
This is why…
Even though some folks may not “feel” like they need to own a life insurance policy, the added benefit of owning one that would provide an immediate cash infusion to the surviving family members is often something even the wealthiest of clients will take advantage of.
#4. Pay off large debts.
Mortgages aren’t the only kind of large debts an individual may have. Sometimes, individuals may also have:
- Large private student loan debt with co-signers.
- Business loans with co-signers.
- Large credit card debt,
- Vehicle loans, which may include auto loans, boat loans, RV loans etc…
- Investment property loans,
- Etc…
This could all become a burden to the surviving family members if there isn’t immediate cash to help them continue making payments. For this reason, even those who may not feel that their family needs a life insurance policy for long-term financial protection will choose to purchase one to cover any short-term costs that may arise immediately following one’s death.
#5. Protect one’s business.
If you don’t own a business, this “benefit” may not make immediate sense to you; however, for those who do, thinking of it as your “baby” probably isn’t too much of a stretch.
This is why…
It’s not all that uncommon for business owners to take out a life insurance policy on themselves so that if they die, their family and/or business partners would have some working capital to keep the business afloat and make sure that they have enough time to make any changes to the business as a result of the insured death. These changes may include:
- Hiring additional help to cover the roles the insured played in the business.
- Finance any “buy/sell” agreements that may or may not be in place.
- Cover the cost of any existing SBA loans.
Or simply allow the surviving family members or partners enough time to find a suitable buyer for the business if that is ultimately what they feel is best.
OK, so now that we’ve covered some of the benefits of owning a life insurance policy that will have an immediate impact on your beneficiaries, let’s take a moment and discuss some of the benefits of owning a life insurance policy that could benefit you while you’re alive.
#6. Personal protection via living benefit riders.
One benefit that many individuals fail to take advantage of is purchasing additional “riders” to one’s life insurance policy, which can potentially provide protection to the insured and their beneficiaries while they are alive (AKA Living Benefits)!
Such riders can include:
- Accelerated death benefit
- Disability waiver of premium
- Long-term care rider
- Chronic illness rider
- Disability income rider
#7. Potential Tax Advantages.
While nobody here at IBUSA is a tax expert, we can tell you that many of our clients purchase a whole life insurance policy specifically to take advantage of some of the “tax benefits” that can be achieved by owning one.
In fact…
For this very reason, many of our clients will purchase a whole life insurance policy vs. a term life insurance policy regardless of the cost or the ultimate death benefit that will be left to their beneficiaries. While this topic will exceed to scope of this article, it’s important to understand that whole life insurance policies can allow one to receive:
- Tax-free loans from the policy, once enough “cash value” has been created (think Infinite Banking),
- Tax-advantaged growth of own money within the cash value life insurance policy,
And dividends from the insurance policy itself.
#8. Maximize one’s pension.
Life Insurance policies can also be used to allow an individual to maximize his or her pension.
For example, many pensions allow an individual to maximize their pension benefits in exchange for having all of their benefits disappear at the time of their death.
Which in many…
Cases would leave one’s dependent spouse, financially insecure. As a result, many individuals will choose to receive fewer benefits while alive so that their benefits would continue to be provided to their dependent spouse.
That said, however…
It may be possible for some to choose to forgo any payments to their surviving spouse and receive a larger pension benefit while alive by supplementing any potential hardship to their loved ones by purchasing a life insurance policy that would ensure their financial security once they’re gone.
In this scenario…
Not only is your spouse financially protected when you’re gone, but you also get to enjoy more of your hard-earned retirement benefits while alive!
#9. Provide an instant estate and/or asset.
Another benefit of purchasing a life insurance policy is that it can create an instant estate or instant asset for their loved ones. This means that if one of your goals in life is to make sure that your family is financially protected when you’re gone and that they inherit something like a home or money which could help them improve the quality of their life, chances are, you might feel a bit guilty “livin’ it up” in retirement.
You might…
Think twice about traveling the world first-class or buying that new car that you’ve always wanted. You might also look at your retirement funds that are slowly (but responsibly) dwindling and think to yourself, should I set up a college fund for my grandchildren? Questions like these shouldn’t prevent you from living the retirement that you deserve but do gnaw at you regardless.
The good news is…
That if you choose to purchase a life insurance policy leaving behind enough money to make you satisfied, you don’t have to worry about how much is left in your bank account when you’re gone. Instead, you can live your life freely, knowing that when you’re gone, your insurance policy will provide for your loved ones. This brings us to the last benefit that we wanted to discuss here in this article, which is…
#10. Peace of mind.
At the end of the day, regardless of “why” you have chosen to purchase a life insurance policy, the one thing that remains constant will always be that sense of peace, knowing that when you go, you’re loved ones will be financially protected or at least not financially burdened by your passing.
So, if you’re ready to see what it might cost you to gain some peace of mind, give us a call; we’d be happy to help!
