Life insurance provides you with two major benefits. First, it protects loved ones against the financial consequences of your death. Second, it offers living benefits.
The financial effects of death can be devastating. When you lose a spouse, parent, child, sibling or grandparent, the emotional turmoil can be extremely severe. Yet, the financial repercussions can be even more overwhelming than the loss itself. With no life insurance, surviving family members are often thrust into a position of acute financial hardship. Not only are they are left dealing with the loss of a future income, but they must also handle the immediate outlay of finances demanded by the death and burial expenses that have been unexpectedly generated.
If you look at the mortality statistics, you will see that a significant number of people die each year, long before they achieve their normal life expectancy. If the deceased is a breadwinner in a family, that premature death can have tragic consequences, on many levels. Not only are survivors trying to deal with deep personal grief and loss, but they are also facing grave financial concerns. They can no longer rely on that breadwinner’s salary to meet the daily living expenses.
Aside from the cost of the funeral, other expenses survivors must contend with include executor’s fees and estate administration costs. Outstanding debts, like car loans, mortgages, credit cards, medical expenses, promissory notes and death taxes, will fall on the shoulders of the survivors, and must be paid. There are state and federal taxes to consider, as well.
Also, consider the future security of loved ones. Living expenses, mortgage payments, and children to raise and educate, are only a few of the concerns, but in the end, it doesn’t matter what financial obligations are left behind. The bottom line is bills must be paid, and that takes money. If you want to guarantee your family does not suffer through the financial devastation a premature death can generate, then you must make plans now, and ensure they have adequate funds available.
Some survivors may have a time during which it will be difficult to work, and some may have to think about a survivor’s blackout period. This is a time where social security stops paying the surviving spouse, because dependent children are no longer a factor. These events are difficult if no monies are available. Also, some families try to plan for a surviving spouse’s retirement needs. Because of the fact that life insurance can generate an immediate estate, at a time when it is most needed, it is a means of estate building.
Life insurance also supplies living benefits, as some types of permanent policies offer a cash benefit. In addition to the death settlement, they accrue a cash value, and this cash value belongs to the policyholder. Some permanent policies also permit withdrawals from the cash benefit, and these can be used for any reason the policyholder chooses. The policyholder can also take out loans from the insurance company, by using the policy’s cash value as loan collateral.
Susan Reynolds is the webmaster for a leading South African Insurance Provider who specialises in Life Insurance Options.
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