Life insurance can be an important part of your financial strategy. Indeed, a life insurance policy can help ensure that your loved ones have a secure financial future after your death.
Life insurance can not only help you cover your final expenses, but it can also provide your family with a financial safety net by helping you replace your income or serving as a legacy for a loved one. Read on to learn more about some of the ways life insurance benefits can be used:
Here are some common uses of life insurance benefits:
PAYMENT OF FINAL FEES
Life insurance policy benefits can be used to help pay for final expenses after your death. This can include funeral or cremation costs, medical costs not covered by health insurance, estate liquidation costs and other unpaid obligations.
PAYMENT OF DEBTS OR REPLACEMENT OF REVENUES
Life insurance benefits can help replace your income in the event of death. This means that your beneficiaries could use that money to cover essential expenses, like paying a mortgage or paying your children's college tuition. It can also be used to pay off debts, such as credit card bills or an outstanding car loan.
Some people buy life insurance with the intention of leaving the death benefit to their loved ones. If you want a specific person to inherit your benefits, the Insurance Information Institute (III) suggests designating the chosen heir as the beneficiary of your policy. Thus, your life insurance benefits will fall into the hands of the person who wanted to receive them.
PAYMENT OF FEDERAL OR STATE TAXES
Depending on state laws, your heirs may be required to pay inheritance tax when receiving an inheritance. The III says that life insurance benefits can be used to partially or fully offset this cost. It would be a good idea to consult your insurer or a financial professional to understand how property taxes can affect your beneficiaries.
Life insurance policies can also be created with your favorite charity as the named beneficiary, says III. This can help you ensure that your philanthropic goals are met after your death and that benefits go to the charity of your choice.
Life insurance can be a touchy subject, but it can help ensure a more secure financial future for your family in the event of the unexpected. Contacting an insurance agent can help you better understand the types of life insurance and determine which type of policy is right for you and your family.