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There are many uses for life insurance. One of them is that you are planning for your family’s financial future.
You may want to ask yourself what would your family do if you were to pass away today?
This is when life insurance comes into play. It sets up a plan for a financial strategy that can ensure your family is financially taken care of. When you buy insurance, you are guaranteeing a replacement of your income for your loved ones.
What is Life Insurance?
It’s important to understand how life insurance works. The most common type of life insurance is “term” life insurance. With term life, you pay a fixed monthly premium and receive coverage for a fixed number of years (e.g. 20 years).
That is, the insurance company will pay a fixed amount of money to your beneficiaries if you pass away during that time. This is a great way to set up a financial plan for your loved ones in case of an emergency.
What Exactly Does Life Insurance Cover?
Life insurance can cover many things. When your beneficiary files a death claim for you, they will have access to use the insurance money to pay for different expenses. These can include co-signed debt, mortgages, medical expenses, living expenses, etc.
Ways Life Insurance Can Save You Money
Now that you have a better understanding of what life insurance is and what it can be used for, let’s dive into ways that life insurance can save you money.
In this article, we’re going to cover the seven different ways that life insurance can save you money.
Paying Final Expenses
Once someone is no longer here, their beneficiary can use the money that was saved to pay off any costs that were associated with you. This could mean paying for your funeral, medical bills, or even your estate settlements.
Paying Off Debt
If there is any past debt that you left behind, your beneficiary can use the life insurance money to pay it off. This can be helpful, so you don’t have the burden of taking on their debt.
The same goes for income. If you were one of the main sources of your family’s income, then the life insurance money can help pay for living expenses. It is helpful for your beneficiary to get back on their feet after something like this happens and it’ll help cover day-to-day bills.
One of the main reasons that someone would purchase life insurance is because they are leaving behind a legacy for their loved ones. If you are having trouble picking your beneficiary, life insurance will encourage you to put your heir as your beneficiary. This is important to pick so your money will go to the right person.
Paying Federal Taxes
Depending on your asset at the time of your death, your family may have to pay federal taxes on your assets. Life insurance can be used to cover these taxes, ensuring your beneficiaries don’t have to sell your assets or be left with the burden of paying owed federal taxes. Don’t miss these overlooked tax deductions.
Paying State Taxes
Just like paying federal taxes, you also may have to pay state taxes when you pass away. Of course, this depends on your state’s rules and regulations. The best way to find out or handle this is by setting up a meeting with your life insurance broker. That way you can iron out all the details and get everything sorted right away.
“A good man leaves an inheritance to his children’s children, but the sinner’s wealth is laid up for the righteous.” Proverbs 13:22 ESV
Most people are unaware of this, but you can assign your beneficiary to be a charity. This is for the people that have a more reserved family situation and want their money to go to a good cause.
All you have to do when you set up your life insurance policy is state the charity that you want your money to go to and your life insurance company like RBC will make sure that your money goes into the right hands.
Benefits to Buying Life Insurance
There are many benefits that come with buying life insurance. One of them is that you are providing security for your loved ones. If something unexpected were to happen to you, then they have a backup plan to help them get through the difficult time.
Another benefit of having life insurance is getting coverage through your job. A lot of times when you sign up through your employer’s life insurance company there are a lot of perks that come with it.
Let’s say for instance that when you sign up through their life insurance company and have been putting money towards it for a year. Many companies will match what you put into your life insurance account, or they will put their own company percent.
This is beneficial because you will be able to save even more, and your family will have a bigger cushion to fall onto.
Cons to Buying Life Insurance
While there are many benefits to having life insurance, there are always a few downsides. However, the cons don’t outweigh the benefits in this case.
Some of the cons that people see with life insurance deal with situations like signing up with their company’s life insurance program. The cons are that if you leave your current position, you will be asked to transfer your life insurance policy to something different or to a new place.
Another con is the terms and conditions of your policy. You must make sure that you read the fine print on this one. There are some policies that will end when you are still alive, which means that there is really no payout. However, to avoid this con, make sure you are looking at the life insurance policies that provide a payout even when the policy ends (permanent life insurance).
Discussing Life Insurance Can Be A Bit Nerve-Racking
We understand that talking about life insurance can be a bit nerve-racking, but it is an important thing to consider and get done. Especially if there was something unexpected to come up and you were unable to handle the situation. Give life insurance a consideration and make sure that your family is in the best of hands.
Gregory Rozdeba is the President of Dundas Life, a digital insurance brokerage. He grew up in a Christian family and always appreciated helping others to find the financial protection they need for their families.