Most people think of life insurance as a safety net for their income. If something happens to you, you know that your beneficiaries will receive a cash payment to help support and protect them.
And yet, life insurance can actually do so much more! Even though the primary function of life insurance is to provide a liquid asset, the ways in which you can access your benefits might surprise you.
Life insurance protects your assets. Your estate will be subject to estate taxes, which can sometimes force the sale of assets. None of us can predict when we will die, and that means our heirs could be forced to sell assets at a bad time (such as when the real estate market is weak, for example). Some people choose to purchase a life insurance policy that will cover taxes on the estate, so that assets are preserved.
Life insurance can prevent the division of assets. If you own valuable assets, such as a home, then those assets are included in your estate when you pass away. If you want to leave an equal legacy to each of your heirs, they might be forced to sell the home or other assets in order to equally divide your estate. But if you purchase a life insurance policy in the right amount, it can substitute for other assets that you might want to leave solely to one beneficiary.
Life insurance can help you save for college. What would happen if you die before you’re able to pay for your children or grand board.
Life insurance protects your retirement income. Some retired couples live, at least partially, on a pension that one spouse earned through past employment. Yet, that money will vanish upon their death. A life insurance policy in the right amount can serve as a backup form of income for the surviving spouse.
As you can see, life insurance isn’t only about providing a cash benefit to heirs. The ways in which they access this money can provide additional benefits. Work with a qualified insurance agent to determine your life insurance needs, and your dependents in the future.