What is
life insurance?
Life insurance is protection against financial loss resulting from
death. It is an insurance company's promise to pay your beneficiary
a specific amount of money when you die in exchange for timely
payment of premiums.
When should you get life insurance?
- There's anyone in your life
who depends on you. Life insurance helps provide them with
funds to live on if you should die.
- You're young and healthy.
Now is the time to lock in low rates.
- You're single or divorced.
Your outstanding bills may be a burden on your parents or
children.
- You get married. You
don't want to leave your spouse with a lot of debt on top of his
or her grief.
- You own a home. Life
insurance can provide your loved ones with money they can use to
help make the mortgage payments.
- You're expecting a child,
have children or are planning on to adopt. You want to help
ensure that his or her needs will be taken care of, including
education.
- You have aging parents.
You'll want to know they'll be taken care of, even if you can't
do it yourself.
Why do I need life insurance?
Although you may not think about it,
your ability to earn income is a significant asset and life
insurance helps replace lost income in the event of your premature
death. Here are some reasons people buy life insurance.
The death benefit may be used:
- To replace income the family
would need to maintain their standard of living after the death
of a wage earner.
- To pay off a mortgage loan and
other personal and business debts or to create a rent fund.
- To create a fund for children's
education.
- To pay final expenses, such as
funeral costs and taxes.
- To create a family emergency
fund or a fund for a family member with special needs.
Life insurance is a unique asset which is used to solve some of
life's perplexing financial problems due to its potentially high
yield and its tax-favored benefits.
Life insurance can be used to:
Create an estate. Where time or other circumstances have kept
the estate owner from accumulating sufficient assets to CAE for his
or her loved ones, life insurance can create an instant estate.
Pay death taxes and other estate settlement costs. These
costs can vary from a low percentage of three to four percent to
over 50% of the estate. Federal Estate Taxes are due nine months
after death.
Fund a business transfer. Business owners often agree to buy
a deceased owner's share from his or her estate after death. Life
insurance provides the ready cash to finance the transaction.
College fund for children or grandchildren. Cash value
increases, in a policy on a minor's life or the parent's life, can
be used to accumulate funds for college.
Pay off the home mortgage. Many people would like to pass the
family residence to their spouse or children free of any mortgage.
Often a decreasing term policy is used, which decreases in face
amount as the mortgage balance is paid down.
Protect a business from the loss of a key employee. Key
employees are difficult to attract and retain. Their untimely death
may case a severe financial strain on the business.
Create a retirement fund. Current insurance products provide
competitive returns and are a prudent way of accumulating necessary
funds for retirement years.
Replace a charitable gift. Charitable Remainder Trusts
provide tax benefits and life insurance can replace the value of the
donated asset. Policies can also be paid directly to a charity.
Guarantee loans. Personal or business loans can be paid off
with insurance proceeds.
Equalize inheritances. When the family business passes to
children who are active in it, life insurance can give an equal
amount to the other children.
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