Are you prepared for the future?
Life insurance policies go beyond just protecting family members from your earning ability.
Most people buy life insurance policies to protect their family in case of an unexpected tragedy. If there’s no one to earn money then life can quickly become a challenge. Life insurance policies are one of the best ways to transfer the risk of not having a source of income for your family.
Don’t leave your family without the support they deserve if something unexpected happens.
If you’re ready to protect your loved ones’ future, here are the benefits of life insurance that you need to know about.
1. Transfer of risk
Accidents don’t come with an invitation. However, they can cause irrevocable damage to the family and put them in the position of a financial crisis.
That is why it is essential for the bread earner to buy this policy.
Traditional life insurance policies include paying a lump sum amount to the family members in case the insured person dies.
Bookkeeping expert Peter Wilesmith explains that it’s best to look into life insurance while you’re fit and healthy. She explains that “no one wants to think about their own passing. But by putting in place a fail-safe while you’re young, you can ensure your loved ones are protected if anything does go wrong in the future. A quick conversation with your partner can feel uncomfortable, but protect them for life.”
2. Investment value
Unlike term life policies, whole life policies work a bit differently.
Whole life policies combine your protection benefits along with a saving bank account instead of providing a significant amount of money after the insurer dies.
Whole life insurance policy premiums have two parts:
- One that compensates for accepting the insurance risk for the insurance company
- A second where the money that builds the cash value.
The cash value of your policy builds as you keep paying regular premiums. The insurance company reinvests your money to make more cash. However, you get guaranteed cash value from the insurance company.
The takeaway? A whole life insurance includes the benefits of a traditional life insurance along with regular saving by paying a fixed premium.
3. Tax advantages
Investing in a life insurance policy means your funds get reinvested in bonds or stocks, or maybe even a combination of these two.
But, the main advantage is you get a tax-deferred savings account.
This allows you to grow your investments faster compared to what you usually would if you had a regular savings bank account taxed annually.
According to the team at Energy Healing Massage, there are also health benefits that can come with a life insurance policy. They explain “your health and lifestyle can impact the cost of your premiums. So by changing your lifestyle and becoming healthier you can actually minimise your premiums. That means advantages in your hip pocket and to your waistline.”
4. Serves as collateral
The cash value of an insurance policy can be used as collateral. This is a hard asset. You can borrow money against your whole life insurance policy.
This is crucial for families who want to buy a new house. The policyholder can use this asset as a down payment to draw funds for the house.
5. Structured savings approach
Life insurance policies have two benefits:
- You save money as you earn
- You are making arrangements for your family to earn money in case you die.
It is a challenge to save money regularly for Australians. A life insurance policy forces you to save a certain part of your income regularly. That is why life insurance is an essential way to save for your retirement.
Life insurance is essential if you are the primary bread earner in the family. It helps to protect your family if you die.
Additionally, life policies also give you an opportunity to save regularly for extended periods in your career.
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