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What You Might Not Know About Life Insurance

November 08, 2022

If you are a pre-retiree or thinking about your retirement, you probably have plenty of questions about your future and what you might need to save for. Many people need to realize how much life insurance can benefit them financially. Without it, your family could be in financial trouble if something happens to you.

Here are surprising things you might not know about life insurance that can help you understand what a valuable financial planning tool it can be.

Some Life Insurance Policies Let You Take Cash Out

When shopping for life insurance, you will notice many different policies available. For example, you might be interested in universal or whole life insurance. You can also explore term life insurance or variable life insurance. Whichever option you are most comfortable with, you will notice that there is usually some flexibility with the policy.

For example, universal and whole-life policies have a cash value. In these policies, you can withdraw money from your policy if you need to cover sudden expenses such as medical bills or home repairs.

Therefore, when shopping for life insurance, remember that different options can work better depending on your circumstances.

The Benefit Amount Is Not Taxable

If you have a life insurance policy, the benefit amount is what you will pass on to your beneficiaries) when you die.

What you should know about this benefit amount is that it is not taxable. The Internal Revenue Service (IRS) does not require your loved ones to pay taxes on the amount after receiving it. This will assist your beneficiaries in avoiding any tax increase that may occur.

However, you should understand that this rule only applies if the beneficiaries do not transfer the policy or receive interest. If that's the case, then the IRS will require your beneficiaries to pay taxes on the amount.

Life Insurance Can Be a Helpful Financial Planning Tool

Like any other financial product or tool, you can use life insurance in various ways. Depending on the type, you can use its cash value to help pay off your debts and boost your financial security.

Life insurance may be able to eliminate your debt after you pass away, leaving your loved ones with less to worry about.

You Don't Always Need a Medical Exam to Get Coverage

A common misconception about life insurance is that you can only get it if you pass a medical exam. This is only sometimes the case. Some providers ask no medical questions, while others require a brief medical questionnaire to obtain coverage instead of going through a physical exam.

Conclusion

Life insurance is a financial planning tool you should consider taking advantage of. This coverage can protect your loved ones against financial hardships, thus helping you plan for the future. If you haven't yet started shopping for this important policy, it's time to start.

At ´╗┐IM Wealth Partners, we help our clients take early control of their retirement planning and financial security. Don't hesitate to get in touch with one of our experienced advisors to get started.