Life insurance
Why do I need life insurance?
Life insurance is an essential part of many financial programs. Most people buy life insurance to replace income that would be lost at the death of a wage earner. The cash provided by life insurance can also help ensure your dependents are not burdened with significant debt when you die. Keep in mind that in order to purchase insurance, you will have to qualify for coverage.
Some of the benefits of life insurance include:
- Providing loved ones with an income tax free death benefit: Life insurance is a financial instrument that provides instant dollars at your death – and you choose where those dollars go. Free of income taxes, you can fund a favorite charity or provide a legacy for loved ones. Keep in mind that the death benefit is subject to the claims-paying ability of the insurer.
- Protecting yourself from living “too long”: Life insurance is designed to cover one of life’s greatest hazards: premature death. Because of its accumulation potential and access to the cash value, life insurance can help address the opposite problem: living too long and running out of money. For example, life insurance permits you to access a portion of your cash value – through a loan – on a tax favored basis. If you decide to take a loan, and the policy contract is surrendered with an outstanding loan, it could create a taxable event. A loan will also reduce the cash value and death benefit.
- Building an instant estate: Life insurance is the only financial vehicle that creates an instant estate at your death.
- Providing cash value: Some life insurance policies have a cash value feature which lets you contribute premium in addition to the amount you pay for your insurance coverage. Learn more about Cash Value Life Insurance.
If you decide to purchase a policy, part of the amount you pay in premium is used to cover certain fees and expenses such as mortality, distribution fees – as well as other fees and expenses that apply based on the policy you choose.
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This information should not be considered as tax advice. You should consult your tax advisor regarding your own tax situation.
