Having a secure future is essential to enjoying retirement, but only 29% of Americans are financially stable. Unfortunately, that means that most individuals don’t have the funds needed to live out their years.
However, there are several ways to make sure your loved ones are fine if you pass away and life insurance is one of them.
To learn more about the benefits of obtaining a life insurance policy, take a look at the information below.
What Is Life Insurance?
Life insurance is a safety net for families. If something were to happen to one of the primary members of a household, the surviving relatives are covered. Benefits from life insurance help to cover funeral expenses and other financial obligations.
If a person dies while under a life insurance policy, the family members receive a payout—either in a lump sum or in installments.
The good news is, life insurance money is tax-free and you get it in exchange for a monthly premium. There are different options for life insurance policies, and the two main options are term and whole life insurance.
Term Life Insurance
Term life insurance lives up to its name. Your policy is active or a certain term which is usually for 10, 20, 25, or 30 years. If you pass away doing that term, your family is paid a death fund and no longer is charged for future monthly premiums.
For instance, if you have a 30-year policy and you pass away, your family members are not held liable for the remaining years of the policy.
The biggest downside to term life insurance is that you could potentially outlive your policy. If you were to die shortly after your term comes to an end and you haven’t renewed the policy, your family won’t be covered.
Unfortunately, that means you would have paid for a policy that your family can’t take advantage of.
On the other hand, term life insurance has its benefits. It’s generally less expensive and it’s a great choice for financial planning.
Let’s say you have a 20-year mortgage, getting a life insurance policy that’s the same length can ensure that your family is covered in case you pass on.
Whole Life Insurance
Whole life insurance is a lot like term life policies, but there is a slight difference. It’s a permanent life insurance policy that does not have an expiration date. You and your loved ones have lifetime protection without the worry of the term ending.
Another plus to whole life insurance is that the premiums you pay go in an account that accumulates money overtime. Your family will receive the accumulated cash along with the death benefit, and it can be accessed while you’re still living.
However, unlike term life insurance, there are taxes applied when you withdraw the money. But it’s only applied once the funds are drawn.
If you choose to withdraw while you’re still living, be aware that unless you put it back, that takes away from what your family will receive when you pass away.
Who Needs Life Insurance?
It’s vital to choose the proper life insurance policy to suit your needs. Here are a few suggestions of the best option for the most common situations:
If you owe a mortgage, getting term life insurance is a wise choice. The length of the policy can match the years left on the mortgage.
That way, if you were to pass on, your family would not have to move out because the policy would cover the mortgage.
Individuals With Large Net Worth
If your net worth is a substantial amount, life insurance can help to provide money for the heirs of the estate. It contributes to inheritance taxes and pays the estate. Permanent life insurance is best for people who are concerned with estate taxes.
Individuals Who Want to Leave an Inheritance
Even if you don’t have a high net worth, you can still leave something for your dependents and other family members. You don’t need to have a lot of wealth to make sure that your family is covered in your absence.
Life insurance can provide a small inheritance to your spouse and children. Plus, whole life insurance pays out no matter when you pass away.
Life insurance is a great backup plan for business owners. It can pay off business debts in the event of death. It gives your family members the funds needed to pay off estate taxes or fund a buy-sell agreement.
For business owners, permanent life insurance or term life insurance is beneficial.
Whole life insurance combined with a cash account can help retirees supplement their retirement savings. Since whole life insurance allows you to withdraw from accumulated cash funds, you can access it anytime.
This is a good option for middle-aged individuals who are planning for retirement and want to use their whole life insurance as a financial safety net.
Those Who Want Funeral Cost Coverage
Some people want life insurance simply to cover their funeral costs. A permanent life insurance policy is best since it doesn’t have a term date. Plus, it can help with additional expenses incurred as well.
Get the Financial Security You Need
If you need assistance planning for your financial future, Pine Grove Financial Group can help. We put our clients on the road to retirement success so they can live comfortably and their loved ones are secure.
To inquire about how we can assist with life insurance options and other services, call us at 651-714-0323 or request an appointment online.
We look forward to connecting with you soon!