Life Insurance as Money Instrument and Protection
Life insurance is one of the most important purchases you can ever make to protect your loved ones and your self and as life insurance investment as well. In case of accident compensation, insurance companies will lend a hand to make payments, maintain a family business, secure funding for future needs such as education for your kids, and prepare for your pension plans.
Perhaps some would suffer financially in the case you pass on; you need life insurance as protection. This type of insurance leaves money to your loved ones after your death. This cash compensation for death makes full compensation for your loved ones needs to meet certain financial requirements, such as the price of the funeral, daily living expenses and the funding of universities for your kids.
The other benefit payments that you will get is the life insurance money won’t get any federal tax for life insurance money. Life insurance money may come handy and in the right time in helping to pay medical costs incurred necessary, funeral expenses, and ends behind the cost of the settlement house, taxes and other obligations, such as lump sums and the remains balance of your mortgage payment.
Life insurance is the only instrument that can provide living benefits or become self-completing upon death. Life insurance is an important part of your total financial risk management picture.
Life insurance provides a source of instant and tax-free liquidity (income). Such liquidity is very important in the early stages of family and economic development and can also help protect accumulated wealth in later years by providing an instant source of (tax-free) cash.
Two Basic Kinds of Life Insurance
TERM LIFE INSURANCE—Provides protection only for a specified term or period of time. The policy pays off only in the event you die. Term life insurance is the cheapest form of insurance protection in terms of initial premium insurance payment, but not necessarily the most cost effective form of insurance in the long run. Getting term life insurance is probably the best option if you only need life protection in certain duration of time.
PERMANENT LIFE INSURANCE—Protection is provided for the lifetime of the insured. Other names for permanent insurance include: whole life insurance, interest sensitive, or universal life insurance. Such policies have a cash value (insurance savings) feature. The cash values accumulate on a tax deferred basis at a very competitive rate—currently 8–10%. The present-day policies are structured to allow the premiums to ‘‘vanish” in a relatively short period of time—approximately 10 years.