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We prioritize insurance planning is a must because it is protection to the life cover risk. It will help you understand whether you are under-insured or over-insured and the existing policies can be earmarked in the Financial Calculators structure.
Life insurance is important to people who want to protect their family from financial distress after their death. It can be used to provide financial security for loved ones.
The proceeds from a life insurance policy are paid to the beneficiary on a tax-free basis, which provides a lump sum that can be used for a number of purposes. Depending on the type of policy chosen, life insurance can also provide a savings component for the policyholder.
The main reason people consider buying life insurance is to protect the people they leave behind. Having coverage in place is especially important during the policyholder's main earning years. During this time, he or she may have major expenses such as a mortgage, car payments and the like.
He or she may have young children that need to be cared for, and/or aging parents that require assistance. In the case of a stay at home parent or spouse the funds may be used to pay someone else to perform the tasks, like cooking, housekeeping and child care, that the deceased once provided.
The death benefit that an insurance policy provides is meant to replace income so that the policyholder's family is less likely to have to face a major lifestyle change in addition to dealing with the loss of someone who is very important to them. Most people are underinsured, as opposed to having enough coverage.
Ideally, the level of protection chosen should be enough to replace the policyholder's gross income for a number of years. Where the policyholder has a young family, it's not unrealistic to look a plan that will pay out an amount that is equal 10 years of earnings or more.
The death benefit that is paid out under a life insurance policy can be used for any purpose the beneficiary deems appropriate. It's very common for the proceeds from the policy to be used to pay bills and debts the deceased has left behind. That way, his or her survivors are not required to pay them on the deceased's behalf.
The cost of final arrangements is something that can be pricey, even for a very simple cremation or burial. An insurance policy can also be used to pay for funeral expenses and take that pressure off the family.
Proceeds from a life insurance policy can also be used to pay off a mortgage or for general living expenses. If the policyholder has young children, the money may be used for childcare expenses or to hire a housekeeper or nanny. The funds can also be used to pay for post-secondary education for the insured's children, if desired.
Anything that the policyholder's salary was used for when he or she was alive can be paid for with the death benefit that an insurance policy provides. The funds can also be invested to provide a source of income for the surviving spouse or partner in retirement.
Some types of life insurance plans have a savings component as well as provide protection if the policyholder dies. When the person chooses a permanent, universal or whole life insurance policy, part of the money that he or she pays in premiums is used to fund an investment savings plan. The money grows over time and the policyholder can use the money as collateral for a loan from the insurer if he or she needs to get access to cash in a hurry.
The policyholder also has the option of canceling the policy and gaining access to the pool of funds if he or she wishes to do so. This is not a move that should be taken lightly and the policyholder should contact his or her agent or insurance company to discuss options before taking this step.
The individual may also choose to cancel the existing policy and replace it with a term life policy that still provides a level of financial protection but does not include the savings component.
Life insurance is a product that should be included in a plan to protect the policyholder and his or her family from financial disaster. Life insurance is important because it can be used to pay bills and expenses on behalf of the deceased. The funds from a death benefit replace the policyholder's income and can be used to help to maintain a lifestyle similar to the one the policyholder's family had before disaster struck. It is one of the most loving things that a person can do for his or her family, since the person who is insured will not be benefiting from the coverage - the ones he or she loves the most will instead.