Published: September 17, 2024
Life insurance offers peace of mind and financial protection for you and your loved ones. But are there other benefits to life insurance? Understanding the benefits of life insurance is a crucial step in securing the right coverage to fit your circumstances.
Why is life insurance important?
Life insurance is important for several different reasons. Mainly, it can provide financial security along with peace of mind for you and your beneficiaries. It can help cover outstanding debts, replace lost income, and handle funeral expenses, helping to ensure that your loved ones are financially protected after you die.
In addition, life insurance can help with business continuity, estate planning, and can contribute to your long-term financial goals, before and after your death. Different policies allow you to tailor coverage to specific needs, making life insurance a crucial component of your overall financial plan.
What are the benefits of life insurance?
Life insurance offers several key benefits, from financial security to simple peace of mind. Here are some of the main benefits of life insurance:
Coverage for final expenses
Life insurance policies pay out a tax-free death benefit to your beneficiaries when you die. One common use of life insurance proceeds is to help cover the costs associated with death, known as final expenses. These can range from funeral costs to outstanding debts.
Money to your dependents for living expenses
Life insurance can also provide funds to your dependents for everyday living expenses after you die. This may include income replacement for families who relied on the insured person’s income. Other living expenses could include mortgage payments, groceries, utilities, or any other basic living costs.
Tax-free payouts
Life insurance proceeds are generally received tax-free by named beneficiaries, meaning the beneficiary does not have to report the payout as income and does not pay any income tax on the amount received. This provides a tax-advantaged way to provide for loved ones after death.
Cash value growth potential
Some permanent life insurance plans, like whole life insurance, come with a savings portion called a cash value, which can help you grow your money over time. You can use cash value to pay for the cost of insurance as you age, or you can borrow from it as a loan, or withdraw funds from it (tax implications may apply).
What are some common misconceptions about life insurance?
You don’t need it if you’re young and healthy
Many younger and healthy individuals assume they don’t need life insurance. However, securing a policy at a younger age can help you lock in your future insurability and provide financial protection in case you die unexpectedly. Generally, the younger you are, the lower your premiums will be.
It’s only for covering funeral expenses
While life insurance can cover funeral costs, its main purpose is to provide long-term financial support to your beneficiaries, replace lost income, and cover debts and future expenses.
Life insurance from your employer is enough
Relying only on employer-provided life insurance comes with risks. It may not offer enough coverage, and you may lose your job unexpectedly, resulting in the potential loss of your coverage. Depending on the type of plan, you may have as few as 31 days, or as many as 60, to convert your employer-provided coverage to a personal plan.
It’s too complicated
The differences between various types of policies can be overwhelming. Thankfully, a Sun Life advisor can help guide you through the process and find the policy that suits your needs and financial situation.
How to get life insurance
Find an advisor
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Get a quote online
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