One of the main reasons to purchase life insurance is to financially protect your loved ones in case of your death. If you are the primary income earner in your household, your death could create a significant financial burden for your family. A life insurance policy can help ensure that your loved ones are taken care of financially if you are no longer there to provide for them.
The need for life insurance should not be taken lightly as it is one of the most important pieces of financial planning you can do to ensure your family will be well taken care of in the event of your death. This quick guide breaks down all the benefits of life insurance so you can make the right choice when planning.
Most insurance types fall into three categories:
- Term Life: Covers a set period of time
- Permanent Life: Guaranteed lifetime protection
- Universal Life: Flexible long-term option
Term life insurance is the most basic and affordable type of policy. It provides coverage for a set period of time, typically 10-30 years. If you die during that time, your beneficiaries will receive a death benefit.
Permanent life insurance can be more expensive, but it provides lifetime coverage and builds cash value over time that you can borrow against or cash out.
Universal life insurance is similar to whole life, but it has more flexibility in terms of premiums and cash value growth. Variable universal life is the most complex and expensive type of policy, but it also offers the most customization and potential for cash value growth.
Life insurance can provide tax-free income to your beneficiaries. Permanent life insurance allows you to take tax-free withdrawals as long as they are constructed correctly. You will pay taxes on withdrawals of more than the amount of your contribution from a cash-value account, but you are able to take loans from the account tax-free and won’t have to repay the loan or taxes on the amount. If you happen to die with debt before repaying it, the remaining balance of that debt will be subtracted from your death benefit and given to your heirs.
How Much Coverage Do I Need?
The amount of life insurance you need depends on your circumstances and goals. If you’re the primary breadwinner in your family, you’ll likely need more coverage than someone who is single with no dependents. Here are a few factors to consider when determining how much coverage you need:
- Your current income and future earnings potential
- Your debts and other financial obligations
- The cost of raising your children
- Your spouse’s income and ability to work
- The value of your assets
Speak with a licensed agent about your specific financial situation who can then help you determine the coverage you’ll need to secure your family’s future.
Get In Touch
Contact Advisors Insurance Brokers for more information regarding your options to secure life insurance today! (800) 695-8224