5 Ways Insurance Can Improve Your Life

Protecting your most important aspects is crucial in creating a solid financial plan. That’s why people insure their homes and cars. But nothing more is necessary than your life and your ability to make a living. As such, you should also ensure your greatest asset – you. Insurance entails providing a financial safety net that helps you care for yourself and those you love when you need it most.

As you move through life, raise a family, find a partner, and maybe start a business, the importance of a long-term insurance plan increases. The danger of not having enough insurance coverage is immense. According to Investopedia, an accident victim or patient with a health issue, for instance, could go bankrupt or experience poor credit due to an expensive treatment plan. In addition, if you are military personnel, for example, you could be injured so badly in the line of duty that you are no longer able to maintain gainful employment. If this is the case, you can figure out your retirement, disability, and survivor benefits using a calculator like this Disability calculator here. Ultimately, you need to protect yourself and your family.

Insurance is like buying a promise. A promise that your insurance provider will assist you if something catastrophic happens. Sometimes, it’s easy to dismiss the value of insurance since it is an intangible product and doesn’t provide immediate benefit. This article will explore five ways insurance can change your life.

Life insurance goes up in price as you age. However, it might still be possible to get affordable coverage. Colonial Penn final expense insurance for seniors, and many similar companies, can give you a guaranteed acceptance whole life policy.

Sometimes, it’s easy to dismiss the value of insurance since it is an intangible product and doesn’t provide immediate benefit. This article will explore five ways insurance can change your life.

Table of Contents

1. Provides a Safety Net for Your Family

Insurance protects your family when things go wrong. Life insurance can support the life of other family members should a member be lost. Your policy can help replace the loss of your income if your family depends on your income to pay bills. They can use the death benefit to pay off debts like a mortgage, credit cards, and car loans – reducing the financial stress.

In addition, insurance can help improve your family’s quality of life. For instance, a health insurance policy can help prevent bankruptcy in case of a severe illness or accident of a family member. Reports have shown that you and your family are just one serious illness away from bankruptcy. In a survey of more than 900 Americans who filed for bankruptcy between 2013 to 2016, hospital bills and income loss due to illness contributed to two out of three bankruptcies. Besides, uninsured people tend to delay treatment until things get out of hand.

An insurance policy can protect your family in the following ways:

Financial Stability: In case of death, especially the family’s breadwinner, the family members won’t have to change their lifestyle.
Lump-Sum for Crucial Expenses: The best part of a life insurance policy is the extended returns at crucial stages of life. For example, a lump sum from a benefit can come in handy during retirement or when your child goes to college.
Support during Tough Times: Life Insurance cover can help your family members manage expenses during tough times. This could include medical bills during hospitalization, funerals, and legal services.
Pay off Loans: People take loans for various purposes. If life happens, and the loan borrower passes away untimely, the dependents need to repay the loan. By using the borrower’s life insurance, beneficiaries can quickly repay the loan.

However, the main advantage of life insurance is income replacement – to ensure your loved ones don’t experience financial difficulties upon your death. It’s therefore not surprising that $250k insurance death benefit is one of the most popular options for life insurance. As a rule of thumb, you should buy an amount of life insurance to provide income similar to if you were alive. According to CNN, your death benefit on your policy should be ten times your annual salary. Your insurance provider can help you evaluate your needs to determine the best coverage for your family. You can click here to see how much is a $250k insurance.

2. Build and Transfer Wealth

Life insurance could be an effective way to transfer wealth from generation to generation. Life insurance can go beyond income replacement or support beneficiaries upon death for high-net-worth individuals and families.

When used as part of a well-thought-out wealth management plan. Life insurance can:

Increase wealth
Cover estate taxes
Balance inheritances among beneficiaries
Secure a legacy
Enable beneficiaries to retain ownership of vital assets like a family business

Depending on how you use it and the type of life insurance, permanent life insurance can be considered an asset. It can grow in cash value, and the beneficiaries can convert it into cash. The calculated cash value can be considered an asset when calculating one’s net worth.

Permanent life insurance can offer many benefits associated with long-term investments such as mutual funds and IRAs. It provides options when building a diversified wealth management portfolio and can also be an asset for

hedging against market risk.

Here are some types of asset-generating life insurance policies:

Whole life insurance: With this type of insurance co-, you can accumulate cash value over time by allocating a portion of the premium to a cash-value account. Since the interest, capital gains, and dividends from the cash value aren’t subject to taxes. This makes it a popular asset-building system. Besides, the policy owner can borrow from the funds in the account as a policy loan.
Universal and Variable Universal Life Insurance: This insurance policy can also accrue interest over time, and the policy owner can borrow from it while still alive. However, unlike whole life insurance, universal life insurance allows more flexibility in premiums and death benefits. It enables the policyholder to invest any interest earned in sub-accounts similar to mutual funds.

3. Supports Your Needs

Some life insurance policies have valuable “riders.” These are contractual provisions that provide benefits before death. Insurers may amend the terms of a basic insurance policy to provide additional coverage. In sum, riders tailor to meet your needs as a policyholder. However, riders come at an extra cost and in various forms. In some cases, you may not be able to add a rider after the policy has been initiated.

The benefits of insurance riders include savings from not buying a separate policy. For instance, a life insurance policyholder has a terminal illness. They can add an accelerated death benefit rider on a life insurance policy. This rider would allow the insured to enjoy a cash benefit while living. You may use this fund however you wish, whether to pay for medical and final expenses or improve the quality of life.

4. Replaces a Portion of Your Salary if You’re Unable to Work

Have you thought of how you will earn income when you can’t work anymore? Depending on the level of savings, people struggle to pay for essential expenses such as rent and mortgage when they experience loss of income due to an accident or illness.

Insurance policies like short or long-term disability insurance make sure you get a regular income until you can work or retire. Like life insurance, disability insurance helps protect you and ensure you can still take care of your family. Don’t you think income insurance is essential? Think again. Research reveals that over one in four of today’s 20-year old’s will become disabled before reaching age 67. The situation could become more complicated if you’re self-employed and have no sick pay to fall back on. The odds are too high for you to skimp on long-term disability insurance.

Many companies offer their workers long-term disability insurance, so take advantage of that if available to you. Don’t assume your employer will continue to pay you a certain income level. Only a few employers support their staff for more than a year if they’re off sick. However, the duration depends on each organization’s policy. Check what your employer will provide for you if you’re sick. For those injured or disabled, while performing their jobs, most states require the employer to pay worker’s compensation insurance for the victim. In exchange, the affected worker may not sue their employer for negligence.

Whether you work for a company or are self-employed, you should consider long-term disability insurance. Note that the disability must have occurred after the policy’s issuance for an insured to receive benefits. You would typically need to provide medical information, often confirmed by a physician.

5. Fund a Charitable Cause

Life insurance and help you achieve your long-term goals of donating cash to your favorite charity. In addition to tax savings, contributing to a charity organization lets you choose how much premium you pay and what type of policy.

In addition, your gift is safe from litigations as life insurance is considered separate from your other estate assets. Your donation isn’t subjected to estate debts or taxes. You can make a substantial contribution through minimal monthly or yearly payments. Another benefit is that you’ll receive charitable tax receipts as a reward. For instance, the premiums on a $20,000 policy will cost you far less than the payout amount over time. Add your tax credit, and you have a sizable cash gift.

The following are some ways you can donate a life insurance policy to a charity:

Name the charity as the beneficiary in an existing policy.
Take out new life insurance in the name of the charitable organization.
Transfer ownership of your current policy to charity.

It doesn’t take much to leave a lasting legacy. You can significantly impact the groups or issues your charity supports with life insurance. However, make sure you spell out your wishes in your will if you want to include charitable gifts.

In Conclusion

The benefits of insurance, especially life insurance, are immense. Besides getting to protect you and your family’s financial well-being, you can also use it to plan every stage of your finances and even transfer wealth to the next generation. If you’re not sure which insurance is the best for you, contact a professional. They will take time to learn about your needs, listen to your concerns, and educate you on the different options that best fit your needs.

Why life insurance? 6 ways it can help protect and achieve your financial goals

Intergenerational family has dinner together outside

Life insurance is known for the financial safety net it can provide your loved ones should you pass away. However, it can provide additional benefits when used strategically. Specifically, permanent life insurance can help support your broader financial goals, providing a way to build wealth, leave a legacy, manage taxes and help cover the cost of long-term care. An Ameriprise financial advisor can help you decide how life insurance may help support your family, unique needs and overall financial goals. Here are six advantages of life insurance, as well as potential costs and other financial considerations to account for.

1. Protect your loved ones

Life insurance provides money to people you care for when you die. Regardless of your policy type, your beneficiaries can use the generally income tax-free death benefit for final expenses, to pay off a mortgage, finance a child’s education or ensure they can maintain their lifestyle. Having adequate life insurance throughout your life is essential to help prepare for the unexpected, but it’s particularly important if your income is key to your family’s wellbeing, and if you’re in your core earning years, when income replacement is critical.

2. Build wealth

If you want to use life insurance as a long-term wealth-building tool, permanent life insurance can provide cash value. The premiums paid into a cash value policy can earn returns or interest on a tax deferred basis. The cash value pays for the costs in the policy, but excess cash value can grow over time and is accessible to you throughout your lifetime. There are different types of permanent life insurance — such as whole life, universal life, variable life and variable universal life — and each has a different approach to growing the cash value. Some policies have more exposure to the market, while others are not dependent on market returns but rely on interest crediting. It’s important to consider the associated risks when exploring permanent life insurance as an additional tool to build wealth.

3. Provide a flexible source of cash

Withdraw cash tax-free: Generally, if the amount you withdraw doesn’t exceed the amount you’ve paid in premiums (and it’s not a modified endowment contract for tax purposes), the withdrawal will not be subject to income taxes.
Borrow against the policy’s cash valuefor retirement income or other purposes: You are technically not required to repay the loan, though it will accrue interest, and the amount will be deducted from the policy’s death benefit. Accessing policy cash value through loans and surrenders may also cause a permanent reduction of policy cash values and death benefit, and negate any guarantees against lapse.
No withdrawal penalties or distribution penalties: Unlike qualified retirement accounts, when properly structured, there are no federal income tax penalties for withdrawals taken from life insurance policies before age 59 ½, and no minimum distribution requirements. However, withdrawals can impact how long the policy will last and can permanently reduce the death benefit.

4. Help pay for long-term care

Traditional long-term care (LTC) insurance offers a way to cover the cost of care if you need assistance with routine daily activities. However, if you’re concerned about the possibility of not needing the coverage, a life insurance policy that includes a long-term care or chronic care benefit is an alternative solution.

It can help pay for LTC expenses, while still preserving a death benefit for beneficiaries if you don’t end up needing care, or don’t use all of the entire benefit. However, you must have a permanent life insurance policy to take advantage of such options.

Here are two ways life insurance can be used to help pay for long-term care:

Hybrid life insurance policies

Permanent life insurance with long-term care or chronic care riders

Any use of long-term care benefits will result in the policy’s death benefit being reduced, though most hybrid policies will still offer a nominal death benefit even if you use up LTC coverage.

Hybrid products offer LTC benefit extension riders that can allow for a longer period of coverage beyond just the policy death benefit.
Some products offer guaranteed expenses that won’t increase over time, and there are often more flexible payment options than traditional LTC policies.

As with hybrid policies, any rider benefits paid out will result in a reduction of the death benefit.
Generally, the benefits from long-term care or chronic care riders may not be as comprehensive as those that come with traditional long-term care insurance or hybrid policies.

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