Life insurance can be very confusing for many people especially those considering purchasing a policy for protection. There are numerous and varied reasons for buying life insurance which can range from protecting a loved one by paying off the mortgage to providing funds for a child’s college education.
Life insurance benefits are paid Tax free to the named beneficiary and are always available without delay once the claim is properly filed and documented. There are several methods in which to receive life insurance benefits; these range from a lump sum to monthly payments to a combination of both.
Life insurance if paid to a named beneficiary, there is no need for probate. It is possible to include other family members or persons who may have a financial interest in the benefits. Almost any time period can be selected even a lifetime payment. Another option is to keep the funds on deposit until some future use such as college or retirement. Benefits can also be paid out as an annuity and the benefits can include more than the named beneficiary. Numerous income options exist.
Retirement options can also include more than one person and can be set up for any time period. If the funds are delayed for a future date, the amount of the original life insurance benefit is always received tax free, only the accumulated interest would have any tax liability. An available payment option is to use the funds as income but in the event of the beneficiary’s death, the unused portion would then transfer to a named beneficiary, such as a child.
Since life insurance is to offset a financial loss, numerous reasons exist for the use of life insurance. Many policy options also are available in the selection of the best policy for you. These can include permanent insurance (cash value) known as whole life or term insurance for a specific time period. Many options are available in both types of policies.
The best possible plan is to become as informed as possible regarding available policies. Always seek advice in selecting the correct policy and make certain you are aware of the benefits and the costs. Many policies will have an escalating clause to increase premiums later as you age. Make every attempt to ask about the details of the policy and make certain the policy fits your needs. Often times the lowest premium could be more expensive in the long run as premiums may increase.