What are the benefits of buying life insurance?

The benefits of life insurance include an inheritance for children and a financial safety net for your spouse. If you have a permanent life insurance policy, you can use life insurance benefits to supplement a retirement income. Permanent life insurance is at least $41 more per month than term life insurance. However, you can secure affordable rates and the best benefits of life insurance by comparing companies.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent

UPDATED: Dec 30, 2021

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Quick Facts

  • Term life insurance provides coverage for a set number of years while permanent life insurance is more expensive but lasts your entire life
  • Add life insurance riders to expand your life insurance coverage
  • The accelerated death benefit can provide you access to your policy limit if you have a terminal illness

Were you wondering about the benefits of life insurance? Life insurance has several advantages that can help secure tax-free payouts to families.

But what benefits of insurance are the most effective? Can you receive life insurance benefits while you’re alive? Don’t worry — we’re here to help you answer those questions.

Our guide explains the benefits of life insurance, the difference between permanent and term life insurance, and the disadvantages of life insurance. Also, we’ll show you where you can get free term life insurance quotes.

After you learn about the benefits of life insurance, enter your ZIP code in the free online quote tool above to compare multiple insurance companies in your area.

What are the benefits of buying life insurance?

Life insurance has various advantages that work while you’re living and after you pass away. Let’s explore some of the benefits of life insurance:

  • Your life insurance payouts are tax-free
  • Life insurance death benefits can assist you while you’re still living
  • Death benefits can cover debts and final expenses
  • Special perks can provide coverage to children and a spouse
  • You can use life insurance to supplement retirement savings
  • Benefits can go to charities
  • Some perks allow you to use death benefits if you have a chronic or terminal illness

Some of the best life insurance companies provide all the advantages in the list above. However, it all comes down to the type of life insurance policy you have.

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What are the benefits of different types of life insurance?

The benefits of life insurance companies and policies vary. Term life insurance provides life insurance for a set number of years, and permanent life insurance lasts your entire life.

But what are the advantages of having either policy? Let’s break down both policy types.

What are the benefits of term life insurance?

Term life insurance is usually cheaper than permanent life insurance, such as whole life. The benefits of life insurance when you’re younger are lower rates and low health risks for the life insurance company.

Let’s look at the cost of term life insurance rates by the best insurance companies in the nation:

Average Monthly Life Insurance Rates by The Best Life Insurance Companies
CompanyAverage Monthly Life Insurance RatesA.M. Best Rating
Allstate$15A+
Banner Life$9A+
Guardian Life$10A++
Haven Life$11A++
John Hancock$11A+
MassMutual$10A++
Mutual of Omaha$12A+
Nationwide$13A+
New York Life$11A++
Northwestern MutualN/AA++
Pacific LifeN/AA+
PrimericaN/AA+
Principal$9A+
Protective$9A+
Prudential$16A+
State Farm$15A++
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Overall, the benefits of affordable life insurance open opportunities for perks known as riders.

Riders are extra coverages you can add to your life insurance policy to expand your benefits.

For example, a return-of-premium rider refunds all the premiums you paid on your term life insurance if you outlive your policy. The accelerated death benefit rider provides early access to death benefits, but it affects your overall benefit after you pass away.

What are the benefits of permanent life insurance?

If you have a flexible budget, try a permanent life insurance policy. Permanent life insurance policies, such as universal life insurance, provide an accumulated cash value and investment opportunities.

You could pay around $180 per month for a $250,000 whole life insurance policy.

Universal and whole life insurance policies are more expensive. But the benefits of life insurance quotes allow you to choose the best company at the lowest rate.

Also, permanent life insurance policies last as long you live, and you can use them while you’re living.

How does accumulated cash value work?

If you have an accumulated cash value from a permanent life insurance policy, you can withdraw money from it and purchase term life insurance.

However, what you accumulate will be different from what you receive. The money you withdraw from an accumulated cash value is known as surrender cash value.

A surrender cash value is an amount you get after a life insurance company has charged fees after withdrawing your accumulated cash value.

What are the disadvantages of life insurance?

Life insurance is beneficial, but there are various drawbacks. Check out the list below to examine some of the pitfalls of life insurance:

  • The inheritance left behind may be affected by debts and unpaid taxes
  • The life insurance company can take your accumulated cash value
  • Riders can raise your life insurance rates
  • Life insurance rates increase as you get older
  • Poor health can raise life insurance rates
  • High-risk occupations or lifestyles drive up life insurance rates
  • Term life insurance policies don’t have investment opportunities
  • Money borrowed from a cash value could impact your death benefits

Beneficiaries can receive your death benefits, but the inheritance you leave behind could be reduced if you owe taxes or debts.

Your accumulated cash value being absorbed by the life insurance company is one of the most problematic parts of permanent life insurance.

In other words, your life insurance pays out death benefits to beneficiaries, but it won’t pay your beneficiaries the accumulated cash value. You’ll need a special rider to ensure that your beneficiaries receive the life insurance policy’s accumulated cash value in addition to the death benefits.

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Benefits of Life Insurance: The Bottom Line

Life insurance leaves behind a sizable amount of money for beneficiaries. With the right policy amount, you can pay off debts and secure your family’s finances if you pass away.

But choose your life insurance policy wisely. Term life insurance policies can expire, and you can lose coverage.

Death benefits on the lower end are cheaper, but they don’t provide the security of higher policy amounts and longer terms.

If you purchase a permanent life insurance policy, ask about the accumulated cash value rider in addition to how you can use your policy while you’re alive.

Now that you have a better idea about the benefits of life insurance, enter your ZIP code in the free online tool below to compare multiple insurance companies near you.

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Frequently Asked Questions: Benefits of Life Insurance

Do you want to find more answers about life insurance? Read these answers to commonly asked questions about the benefits of life insurance.

#1 – How do I know if I need life insurance?

It depends on what you need. If you’ve started a family, it’s strongly recommended that you safeguard your family’s finances if you suddenly pass away.

#2 – What are the four types of life insurance?

Term life, whole life, universal life, and variable life insurance are the four main life insurance policy types.

#3 – Can I have more than one life insurance policy?

Yes, you can. It’s common for people to have more than one life insurance policy.

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