The Pros and Cons of Life Insurance

Living in a capitalist society, many businesses have offered to sell insurance on almost everything imaginable including life. Insurances can protect one’s health, home or small business. Corporations and companies buy insurance policies too. Even governments buy life insurance plans.

One major insurance product is life insurance, which provides financial support to dependents when one passes away. The insurance payout does not always have to go to dependents. Single policy owners can designate charities to receive funds or dependent family members. Families benefit the most from this type of insurance.

Is insurance for life necessary for everyone?

Single people may not need it if they have funds to cover their future funeral costs unless they have aging parents to look after or other family members depending on their income. However, insurance would be a necessity for single policy holders if they lack savings and investments to cover funeral costs.
Married couples without children may have no need for insurance unless it is a necessity due to lack of other savings. Senior citizens should expect steep rates for an insurance package unless they need it.

What are the main benefits?

The insurance provides a financial payment to dependents after the policy holder leaves this earth. Most likely the payout will initially cover funeral costs of the decedent. The rest of the payout will provide a source of income until financial stability is reached or goals are met for the surviving family whether it is to pay mortgage and other bills or children’s postsecondary education costs. Insurance can be withdrawn due to exigent circumstances; however, there is a 10% penalty if under age 59½ due to Internal Revenue Service regulations. 

What are the types available for insurance covering life?

Universal insurance policy includes a death benefit in addition to a tax-deferred savings vehicle. It is possible depending on the policy and amount to not pay premiums to the insurance. Another type is whole life, which provides death benefits and cash value. Tax-deferred savings is a reason to purchase insurance. Finally, term policy is simply just an insurance covering a defined time window. The major drawback is the lack of cash value due to lower premiums. Thus, term policies are best for healthy, young people and budget-minded families.

What are the drawbacks?

Cash value policies provide tax-deferred growth. When there is a payout due to death, beneficiaries are not taxed for their personal income returns. However, payouts are not free from estate taxes. All insurance policies charge various types of fees. Thus, potential policy holders must analyze the insurance contract before purchasing. Fees can be cheaper or expensive depending on the policy type of insurance.

What are some tactics for purchasing the best life insurance?

Using free quote estimators is a great way to shop for policies. It is best to ask for policy agreements before purchasing even employer plans. Additionally, potential buyers should consult with their families to devise a financial plan for future events as a basis to justify the purchase.



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