According to the 2013 Insurance Barometer Study (put together by LIMRA and the Life Foundation), 95 million Americans do not have life insurance at all. Of course, many people hold off because, like most monumentally-important things you don't “need” right now, it's human nature to decide tomorrow is a better day. Yet another reason so many never bother is they simply don't understand the necessity – and not to mention the versatility – of this type of insurance.
Let's look at a handful of the many ways you can prevent suffering and derive value from policies like indexed universal life.
In our society, burial costs do not come free free, and if you don't prepare ahead of time, they become a burden on a family that is already reeling in their time of loss. There are also ceremonies and formal affairs; while these things may seem irrelevant when you're gone, their true cultural purpose is helping the living manage one of life's most trying transitions.
Doing the work ahead of time ensures your family won't get stuck with the bill while emotions and finances are taxed most.
If you are a major breadwinner in your household, your loss could cripple the family. One of the oldest uses of life insurance is to offset the loss of your monthly salary and prevent this type of tragedy; it's especially imperative if you have young children to support for another decade or so.
For some families, securing this income can mean the difference between living a normal life or a life of poverty.
Leaving a death benefit behind when you go can ensure your children receive an education and a fair shot in life. Higher learning costs more than ever, and without some type of financial assistance, they otherwise may not get the chance.
Perhaps your children are grown and don't need your support, but no one can deny that losing a parent is always a big blow, no matter how old the child. As is losing a spouse. Life insurance provides a way to offer love and support for those closest to you even after you're gone.
Leave behind a lump sum your spouse or children can use to buy a house or a business, or schedule regular payments to create an income for them. You can usually specify when these rewards are delivered too, in order to ensure they are responsible enough, in the case of young children, to use the funds appropriately.
Some indexed universal life insurance policies allow you to use the death benefit in place of long-term care.
Debt can also be a heavy burden for a grieving family. If you have credit card bills, a mortgage, car loans, or other outstanding debts, these will need to be settled. The payout from an indexed universal life death benefit can handle that for you.
Life insurance is often used for estate planning purposes and can be used to liquidate assets, creating cash for paying taxes and settling other obligations.
Want to contribute to a special cause you care about after you go? For some people, this is a way of making their life a bit more meaningful, immortalizing their own name, or just doing what's right. Life insurance can create a donation in the form of a cash death benefit or cash out assets for charitable contribution.
Policies like indexed universal life also make great financial instruments for business purposes.
For example, a policy can ensure your business doesn't go under if you pass away, which is crucial if you're building something you want to last beyond your death. If you have partners, it can also be a way to cash out your share so your family receives financial benefits instead of an ongoing burden.
Another fantastic business use is “key-person insurance.” Most companies have at least one individual, if not a small handful of them, who are integral to the well-being of the company. Whether they have special skills, knowledge, or talent your company needs, their loss could leave your company struggling to maintain the current bottom line.
Key person insurance is meant to offset these losses and help ease the transition.
Indexed universal life is unique in that it can sometimes be a way to create tax-free income while you're still alive. If you take out withdrawals less than the amount of your total premium payments and adhere to regulations set down by the IRS, you don't have to pay taxes on this money. You can also take out loans through the insurance company against your cash value - in this case, the money is tax-free whether you exceed premiums or not.
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