Life Insurance Explained

Purchasing a life insurance policy can be confusing, even daunting. It’s not easy to think about what would happen if something were to happen to you; however, life insurance can be an important part of your financial strategy, helping to ensure a more secure financial future for your loved ones when you’re gone.

Uses for life insurance benefits may include the following:

1. Paying final costs. Life insurance policy benefits can be used to pay final expenses, including funeral or cremation costs, medical bills not covered by health insurance, estate administration fees or other unpaid obligations.
2. Paying off debt or replacing income. Life insurance benefits can help replace your income if you pass away. Your beneficiaries can use the money to help cover essential expenses, such as paying off a mortgage or securing college educations for your children.
3. Securing an inheritance. The Insurance Information Institute (III) suggests buying a policy with a named heir as a beneficiary in order to secure an inheritance for your loved ones
4. Paying federal or state estate taxes. Your heirs may face an estate tax upon receiving their inheritance, depending upon the state of residence and the amount. The III suggests that life insurance benefits may be used to partially or completely offset this cost for your heirs.
5. Making charitable contributions. Life insurance policies can be created with your favorite charity as a named beneficiary, according to the III. The policy can help ensure your philanthropic goals are met after you pass.

When it comes to your life insurance, it’s also important to know the facts in order to make the best and most informed decision for your needs.

Myth: I can’t afford life insurance.
Fact: Life insurance can be affordable, and coverage and cost depends on what you’re looking for. You can start with a policy that fits your budget now, and you may be able to increase your coverage in the future.

Myth: I’m single, young, and/or have no children, so I don’t need life insurance.
Fact: Life insurance may help your loved ones pay off your debts (like funeral costs, student loans or a mortgage) should something happen to you. Life is unpredictable, so it’s important to be always prepared.

Myth: I have life insurance through my work, so I don’t need my own policy.
Fact: If your job provides life insurance, typically the policy ends if you leave that job. In addition, it may not be enough coverage. When you purchase your own policy, you can get personalized coverage to fit your needs for the amount of time you want to be covered.

Myth: I don’t qualify for affordable coverage because of my age or health.
Fact: While advanced age and certain health conditions can affect life insurance premiums, there are many different types of policies available at different costs. If you’re thinking about purchasing life insurance, don’t wait.

Discussing your financial goals with a life insurance agent can help you clarify the right type of policy and benefits to meet your needs. Don’t wait – it’s better to be prepared now so plans are in place when you need them.

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