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5 Main Benefits of Life Insurance

Researcher & Writer
December 10, 2019

They say that buying a life insurance policy is one of the most selfless acts a person can do for their loved ones, and it’s true. After all, let's face it, if you choose to purchase a life insurance policy, its not like you’re actually going to receive any benefits from it during your lifetime…right?

Well maybe...

There are a few perks of buying a life insurance that the actual insured can benefit from, while still being alive and well.

Now since these benefits aren’t as obvious as the benefits to those who are the beneficiaries of a life insurance policy payout, we’ve chosen to list just a few them in this article so that we might help make the decision to purchase a life insurance policy on yourself just a bit easier.

Typically when you decide to purchase life insurance you are making that decision to protect your family. However, there are some benefits of life insurance that you can enjoy as the insured.

1. Life insurance creates an “immediate estate"

An “immediate estate”, what’s that?

What we mean here is that once you’ve been approved for a traditional term of whole life insurance policy, that’s it, you’re done. Your families protection is in place.

So regardless how much money you have in your bank account or how much you money you owe on your mortgage, once your insurance is in place, you’ll know for certain that in the event of your death, you’re loved ones will be protected--- immediately.

As my father used to like to say: “I plan on spending every penny of your inheritance!”

He was able to say this guilt free because he knew that he had plenty of life insurance in place so that his family would be well protected in the event of his death.

Which means that once you’ve purchased your family the right life insurance policy you should feel free to enjoy a life “guilt-free”, knowing that in the event of your death, your insurance death benefit will be there, and typically income tax and death tax free (at the Federal level if your total estate is under $5,340,000; some states do include a death tax) unencumbered of any any other bills or financial obligations.

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2. Maximize your pension

Did you know that most pension plans will have different payout options available to you when you retire? So when it comes time for you to determine how you would like to receive your pension benefits, having a life insurance policy in place could significantly affect your ultimate decision of how you take your pension benefits.

It is a common occurrence when someone is looking to retire that they learn that if they choose to “only” attach their pension benefits to their “own” lifespan, they’ll be able to receive a significantly higher monthly benefit than they would if they attached their monthly payment benefit to the life of both themselves and their spouse.

This difference in the amount received from a pension based on who the benefit is attached to can often be offset by a quality term or whole life insurance policy, but not always.

Some common conditions that could prevent one from being able to offset the pension benefit difference might be:

  • The age of the applicant.
  • A pre existing condition.
  • Financial exclusions due to ones current employment status.
  • Etc…

Which is why, having a quality term or whole life insurance policy in place prior to retirement could mean a much better retirement for you, the insured.

For example, by getting a life insurance policy for yourself today you may be able to set yourself up for a much better retirement plan later on.

How so?

That’s simple, by having a life insurance policy in place to secure your spouse’s financial future in the event of your death, you would be able to maximize your pension payment benefit by simply attaching your pension benefit to your lifetime alone (i.e. no survivor benefit).

This will mean that you’ll receive a larger monthly payment while you’re alive and still know that in the event of your death, your life insurance policy will cover the loss of the monthly pension payment.

3. Accelerated death benefit

OK, so this benefit isn’t the greatest, but if you find yourself able to qualify for an accelerated death benefit, you’ll definitely be happy that it's there.

An accelerated death benefit is a benefit that is included in many life insurance policies today and is typically one that is provided free of charge.

The accelerated death benefit provides for the payment of a portion of a life insurance policy's death benefit prior to the insured’s death, should the insured be diagnosed as terminally ill.

The specifics of any accelerated death benefit will vary from carrier to carrier, however the benefit that one receives by being able to receive a partial payment on their life insurance policy prior to passing away does not!

After all, having the financial means to be able to take care of one's final expenses and last wishes prior to passing away can eliminate an enormous burden, not only on the insured, but also on the entire family as a whole.

Which is why the accelerated death benefit, while not a fun topic to discuss, should never be overlooked when determining which insurance carrier to choose.

4. Protection of your legacy

You’ve worked hard to build your up your estate and legacy, why let estate taxes (Death taxes) and “fire sales” destroy everything that you’ve worked so hard to create!

You may have all the money in the world, but if its not liquid and readily available for your loved ones after you die, it may not mean all that much to them for quite a while.

After all, it’s amazing how often families will find themselves significantly wealthy “on paper” yet completely unable to pay the day to day bills simply because they weren’t prepared for the death of the primary “bread winner”.

Unfortunately, most wise investments tend to be very structured and not very liquid so before you think you don’t need to have any life insurance in place, just ask yourself exactly how much cash would your loved one be able to access during the first 30 days after your death.

Would that cash be enough for him or her to survive on? Now don’t forget to factor in burial expenses, medical bills and any possible legal fees.

If its not enough, you could be forcing your loved ones to liquidate your legacy for pennies on the dollar just so they’ll have enough to survive on while everything else gets sorted out.

5. What’s is the going rate for “peace of mind”?

If you plan appropriately, and you choose wisely, not only does purchasing a quality life insurance give you the peace of mind of knowing you’ve taken the necessary steps in protecting your family in the event of your death, you’ll also be able to rest assured that once you’ve taken those steps.

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