When you mention to your friends or family that you don’t have life insurance, these days they look at you like you’ve just said something crazy. But it’s the reality and many people don’t have life insurance, whether because they can’t afford it or they don’t see the benefit of having it. And, indeed, for some the benefit may not justify an expense. But what about you? Do YOU need life insurance? Allow our Maryland insurance agents to walk you through if and when having life insurance may be the right solution for you.
What’s the purpose of life insurance?
Just like with insurance in general, the purpose of life insurance is to give you peace of mind. In this particular case, the peace of mind is about knowing that your family or someone else dear to you will have a bit of financial relief if you are to pass away. So when you die, your beneficiaries named in the policy will receive either a lump sum or annual payments up to the limits of your policy. This money can be used to cover your funeral expenses, mortgage payments, utility bills and other short-term and long-term needs.
Do you want this peace of mind?
Naturally, not everyone needs or wants this sort of peace of mind. For example, if you have no family and enough in savings to cover your own funeral costs, you won’t be a burden to anyone. On the other hand, if you have a spouse and children and you are the sole or major provider for the family, your death can be financially devastating for your loved ones. In that case life insurance can be of great help.
Other Things to Consider
Peace of mind, although nice to have, is not the only benefit of life insurance. There are many other uses for life insurance that may or may not apply to your situation. Take a look below and note if any of these things would be nice to have.
Some life insurance policies, such as permanent life insurance, also offer a variety of tax benefits in terms of reducing your taxes now and passing the money to your beneficiaries without the income tax. You are often allowed to contribute unlimited funds to your life insurance account where these funds can generate compounded interest, which won’t be taxed as income until and unless you decide to cash it. You can discuss this further with your accountant who may offer additional strategies for reducing taxes through life insurance.
A life insurance policy taken out in the amount of a fixed asset’s value can turn this asset into a liquid one. For example, when a lot of your wealth is in real estate or other fixed assets, it can be difficult, if not impossible, to split this wealth equally between your heirs without selling the assets. However, if you take out a life insurance policy in the value of the property, you can give this one piece of real estate to one heir and give another one the policy payout, so that everyone is happy.
Gifts and Contributions
Are you currently helping someone out financially, such as paying for your nephew’s college, covering treatment for a disabled relative, or helping out a charity? Keep in mind that once you pass away these contributions will stop. But if you purchase life insurance in the amount of total contributions, you can rest assured that whoever you were helping gets the means to finish their project.
If you are a partner in a business and you pass away, how will your heirs get your share of the business if they don’t want to work in it? A common strategy is to take out a life insurance policy that will provide other partners with the money necessary to buy your share out. This way your partners don’t have to sell the business and your heirs still get the money they are entitled to.
As you can see, there are many different ways life insurance can be used. Even if you are single and don’t have children or close family to take care of, you may still benefit from having a life insurance policy. Get in touch with one of our Maryland insurance agents if you have any questions or need help choosing the policy that best meets your needs!