Life insurance won’t be necessary if you have a sizable amount of savings, are debt-free, and have no dependents.
However, if someone relies on you financially but you do not have an insurance policy, it could be an appropriate time to get one.
We’ve compiled 11 of the most common reasons why people get life insurance to help you decide whether you need coverage and whether it’s appropriate for you.
1: To Provide an Income Replacement
Are you the primary source of income for your family, or is your spouse depends on your monthly earnings to pay bills? If either of these two questions were “yes,” you should consider purchasing life insurance.
Term life insurance is low-cost premiums and insurance for a specific amount of time, making it an ideal choice for protection against income loss. Most life insurance companies provide 10, 15, 20, 25, and 30-year terms. When comparing rates, we suggest buying an insurance policy for long enough to cover the age you plan to retire.
2: To Pay for Final Expenses and Burial Costs
One of the main motives for people to purchase a life insurance policy is to be able to leave money to cover final expenses and burial costs. Suppose you are purchasing life insurance to cover your final expenses. In that case, choosing the policy you will not outlive is essential, which is why most people buy universal life or whole life insurance.
Until the age of 80 or beyond, whole life insurance offers typically level premiums and fixed coverage, unlike guaranteed universal life insurance, which can be tailored to your needs. Most UL policies provide a range until the ages of 90, 95, 100, 105, 110, or 120 with guaranteed rates.
3: For Securing Your Mortgage Balance
If you are still owing your house, you might buy an insurance policy that covers life to protect the remaining amount due to your mortgage. When you purchase this insurance, it guarantees that your family members are. Will be able to maintain their home should something happen to you before your mortgage gets paid in full.
Life insurance for the term is the sought-after option for mortgage protection since the policy can tailor to fit your mortgage and the amount of time until it gets paid off.
Suppose you pay your house off more quickly than anticipated; no problem! Insurance cancellations are free of charge and possible at any time. Many term policies also let you reduce the amount of coverage you have to pay.
4: To fund a Buy-Sell Contract
Businesses use buy-sell agreements with multiple owners. Their primary function is to establish how the company would get divided if an owner died or quit the business. It keeps the owners who remain as well as their decedent family members from going to the courtroom or selling the company. If you are already an enterprise owner, making a buy-sell arrangement financed by life insurance could be in your best interests.
In a buy-sell contract, each owner must purchase an insurance policy for life equivalent to their ownership stake in the company. If any of the owners dies, the life insurance policy proceeds will go directly to the beneficiary or spouse of that owner. It makes it possible for the business to operate and prevents the proprietors who are still alive from having to sell the company and its assets.
5: To Maximize the Benefits of Your Pension
Most pension plans provide two retirement options: joint/survivorship options and single-life options. If a joint pension plan is in place, either the pensioner, as well as their partner, will be able to receive a less monthly amount until each pass away. If you choose a single-life pension scheme, the person earning the pension will receive a monthly payment every month until they die.
Although it is true that the pension scheme jointly gives protection for both spouses, the monthly amount gets typically cut by 30% or 40%. It could impact your retirement plans. To avoid this, those in good health or average might benefit from choosing the single-life option and taking out a life insurance plan instead.
6: To Be Able to Leave an Inheritance Behind
If you’d like to leave money to your grandchildren or children, choosing an insurance policy that covers life could be the best choice, particularly if you’re healthy or average. It lets you spend your retirement savings without guilt and leave an inheritance for your loved family.
The payout from the life insurance plan will be made directly to the named beneficiary or the beneficiaries. Additionally, the cash payout from the life insurance policy is tax-free and completely anonymous. Therefore, you don’t have to worry about your loved ones fighting over the money you have left for them.
7: To Settle a Divorce Decree
In divorce proceedings, the judge usually has the breadwinner purchase life insurance. These policies get designed to guarantee that a spouse who is due support will get all the help they have a right to, regardless of whether the spouse dies before the money gets paid.
When the alimony payments get paid on time, you can decrease the amount of insurance you carry to save money or transfer the extra coverage to a different person.
8: To Secure a Large Debt
If you’re seeking a loan, you need to start an enterprise, invest or purchase another house. Life insurance may offer a low-cost method of securing your loan. You could even be eligible for a lower interest rate when you book your loan using the life insurance policy.
Who survives you or your business partners with the funds they’ll need to pay off the loan with your lender? The life insurance policy will also provide for your family members if you die before you repay your debt. In addition, it lets your beneficiaries retain the assets you’ve spent so long accumulating throughout your life.
9: To Provide Liquidity
Most people purchase life insurance to financially protect their loved ones or business owners. If the insured dies, the life insurance policy will give a tax-free amount to the policy’s beneficiary named. Businesses frequently profit from this tax loophole since your policy beneficiary could be a corporation, a lender, or a business partner.
Permanent life insurance offers additional options for liquidity by constructing an untaxed value of cash over time. These funds can access from tax-free sources, or if an owner chooses to withdraw their cash value, the policy will not be liable for any tax on the principal.
10: To Preserve Your Child’s Tuition Cost
We often talk to parents who wish to cover the costs of their children’s college tuition to ensure they’ll have the money they require to go to college. However, many life insurance policies for children need to have a cash value of a significant amount by when they reach 18, and are costly.
Instead of buying life insurance for the child you love, suggest buying term insurance that is cheap on your own life and keeping the remainder. For only a few dollars each month, you can purchase life insurance to pay for college for your children, even if you’re not in the area to assist. If you do this, you’ll save more money in your account than your child’s insurance would have accrued in 18 years.
11: To Fund a Special Needs Trust
A trust with special needs could offer a supplement to the income of your child without making the child ineligible for benefits from the government.
Permanent, non-cash-accumulating life insurance is usually purchased to fund a specific trust for special needs. The purpose of the faith is to separate your child’s personality assets from the death benefit of the life insurance policy you purchased.
Life insurance payments are managed by the trust for special needs and overseen by a trustee who you choose. You may name one of your family members, a lawyer, a bank manager, or an executive as trustees of your trust for special needs. A trustee appointed by your faith for special needs will distribute the funds to your child as required.
Ottawa Life Insurance
If you’re seeking life insurance, we’ll help you evaluate the options. We have the expertise to match our clients with the right solution. We’ve helped hundreds of families and businesses and can also assist you! Call Ottawa Life Insurance today, calling (613) 454-1424 or emailing info@ottawa-lifeinsurance.ca to speak with an experienced agent.?
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