What are the benefits of buying life insurance?

Life insurance for families has several advantages that can help secure tax-free payouts to families. But what benefits of insurance are the most useful? Can you receive life insurance benefits while you’re alive? Don’t worry — we’re here to help you answer those questions.

Our guide will help you discover what are the benefits of life insurance, as well as what is difference between permanent and term life insurance, and what are the disadvantages of life insurance. Also, we’ll show you where you can get free term life insurance quotes.

Read more: How does life insurance work?

Exploring 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 benefit can assist you while you’re still living.
• Death benefits can cover debts and final expenses.
• Riders can provide coverage to children and a spouse.
• You can use life insurance to supplement retirement savings.
• Benefits can go to charities.
• Some riders 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, including nationwide life insurance review. However, it all comes down to the type of life insurance policy you have.

Pros and Cons 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.

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:

Life Insurance Monthly Rates & A.M. Best Ratings by Provider

Overall, the benefits of affordable life insurance open opportunities for add-ons 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.

Read more: Guardian Life Insurance Review

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 accumulated cash value and investment opportunities.

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

Universal life insurance 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 as you live, and you can use them while you’re living.

Understanding Accumulated Cash Value in Life Insurance

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.

Exploring the Disadvantages of Buying 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 life insurance company can take your accumulated cash value.
• Life insurance riders can raise your rates.
• Life insurance rates are higher if you are 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 will receive the death benefit directly but may not get the cash value, depending on the policy.

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 in all cases. 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. Learn how to choose a life insurance beneficiary.

Case Studies: Fictional Scenarios Highlighting the Benefits of Life Insurance

Case Study 1: Securing Your Family’s Financial Future

Sarah, a 35-year-old working professional, recently purchased a term life insurance policy. Unfortunately, she unexpectedly passed away due to a sudden illness. As the primary breadwinner of the family, Sarah’s death left her husband and two young children in a difficult financial situation.

However, thanks to Sarah’s life insurance policy, her family received a substantial death benefit that helped cover their immediate expenses, pay off outstanding debts, and provide long-term financial security for her children’s education and future.

Case Study 2: Protecting Business Interests

John, a successful entrepreneur, owned a thriving business that heavily relied on his expertise and leadership. Concerned about the potential risks associated with his role, John decided to purchase a key person life insurance policy. Tragically, John was involved in a fatal accident. His untimely death could have jeopardized the future of his business.

However, the key person life insurance policy provided a significant payout to the company, allowing it to hire a qualified replacement, cover ongoing expenses, and maintain stability during the transition period.

Case Study 3: Estate Planning and Wealth Transfer

David, a wealthy individual with substantial assets, wanted to ensure a smooth transfer of his wealth to his heirs while minimizing estate taxes. He worked with his financial advisor to set up an irrevocable life insurance trust (ILIT) and purchased a permanent life insurance policy.

Upon his passing, the death benefit from the policy was paid directly to the trust, outside of his taxable estate. The ILIT provided liquidity to cover estate taxes and allowed for the tax-efficient transfer of his wealth to his beneficiaries.

Case Study 4: Supplementing Retirement Income

Mary and James, a retired couple in their 60s, wanted to supplement their retirement income and ensure financial stability throughout their golden years. They opted for a permanent life insurance policy with a cash value component.

Over the years, their policy accumulated cash value, which they could access through policy loans or withdrawals.

They used this cash value to fund additional expenses, such as healthcare costs, travel, and even support their grandchildren’s education. The permanent life insurance policy provided them with both a death benefit for their beneficiaries and a source of living benefits during their lifetime.

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.