The Benefits Of Taking Out Life Insurance
There are many benefits to life insurance, but most of all, it provides financial security to your loved ones when you cannot do so anymore. Many people do not have life insurance because they don’t understand the benefits or think it is too expensive.
There are two types of life insurance, term and permanent. Term life insurance pays a death benefit if the insured person dies within a specific time, for example, ten or twenty years or before they reach a certain age, for example, 65 years. Permanent life insurance provides coverage throughout the insured person’s lifetime, and the death benefit is paid out upon their death.
It is always advisable to review your life insurance policy regularly, especially at milestone events such as getting married or having children. Make the necessary adjustments to ensure the right people receive the life insurance benefits. What are more benefits of taking out life insurance?
Life Insurance Payouts Are Tax-Free
The government granted a life insurance benefit to policyholders and their loved ones. The death benefit lump sum payable from a life insurance policy is tax-free if there are individual beneficiaries. It is vital to name a beneficiary for each life insurance policy because if you do not, the assurer will by default assume the beneficiary is your estate.
If the beneficiary of your life insurance policy death benefits is an estate, it will be subject to estate taxes. Creditors can also claim the death benefits to pay outstanding debts. Not only will there be less funds for your loved ones, but they will also wait for the money until the estate is settled. And there will be no immediate funds available to pay for a funeral or cover living expenses.
Your Dependents Won’t Have To Worry About Living Expenses
How can you ensure your dependents receive the benefits of insurance? Besides nominating individual beneficiaries to the life policy, purchase a policy that provides sufficient income. The Financial Consumer Agency of Canada recommends having life insurance equal to seven to ten times your annual income. Then your dependents can use the death benefit payout for living expenses such as rent or mortgage, school fees, credit cards, student loans, and other general costs.
Life Insurance Can Cover Final Expenses
Insurance advantages include covering final expenses related to a funeral. It can be quite expensive, whether you prefer a casket or cremation, and even more so when you want to be embalmed. With the right life insurance, your loved ones can pay the funeral home and arrange a memorial service that will give them comfort while honouring you.
You Can Get Coverage For Chronic And Terminal Illnesses
Endorsements, sometimes called riders, are additions to life insurance policies that enhance or adjust coverage. If you meet the conditions, it is possible to get coverage for chronic or terminal illnesses added to your life insurance. However, before you decide to purchase such coverage, find out what the definition of chronic or terminal illness is, according to the insurance company you want to buy the policy from. Any additions to the life insurance policy might increase its monthly premium.
A terminal illness rider allows the insured person to use the life policy death benefits, if they are diagnosed with an illness that will considerably shorten their life. The amount you use, and interest, is subtracted from the payout your beneficiaries receive upon your death. There are various types of endorsements, including accidental death, waiver of premium, family income benefit, child term, long-term care, and return of premium, to name just a few.
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