Meet Chris. Chris works in construction. Daily, Chris is exposed to a variety of hazards on the construction site. That’s why Chris decided to purchase a life insurance policy. After doing some research, Chris realized that life insurance policies provide more advantages beyond financial security. Some of these are related to tax benefits.
Stick around to learn more about other benefits that you get with life insurance. The first thing we want to start with is the tax-free death benefit. So, if someone has a life insurance policy, their beneficiary will receive the death benefit upon their demise. This lump-sum death benefit does not need to be reported when the beneficiaries file their taxes.
In other words, the death benefit is not considered income for tax purposes. This makes the payouts received by the beneficiaries tax-free. The next benefit is that the beneficiaries do not need to worry about living expenses.
If you have opted for the correct amount of life insurance, then this is going to cover the expenses of the beneficiaries for a long time. These expenses may even account for college tuition fees. That’s better than going with student loans.
Another benefit is that the final expenses can be covered by the death benefit. A typical funeral would cost more than 7000 us dollars. That includes the viewing and burial fees. Most Americans cannot afford these expenses which would create a financial burden on the beneficiaries. They will either dip into their savings or use credit. Some insurance companies in the US provide policies dedicated to funeral expenses with very affordable monthly premiums.
Another huge benefit is using riders. Riders can improve their life insurance coverage. Something like the accelerated benefits rider allows the policyholder to access the death benefit under specific situations. For example, in the case of terminal illness, the policyholder can access the death benefit early to cover care-related expenses.
There is a range of riders you can choose from. This depends on what is offered by the insurance company you want to purchase the life insurance from. The last benefit we are talking about today is the cash value. Permanent life insurance policies typically allow the policyholder to accumulate cash value in addition to the death benefit.
This cash value can be used to cover expenses and can be a source for a loan. Most importantly, you can tap into this cash value when you are in you retire. Knowing the potential benefits of life insurance is an eye-opener concerning making up your mind on which policy you want to purchase.
For example, the cash value benefit is not something that is provided by temporary life insurance policies such as term life insurance.