How does Life Insurance benefit your family?

By Compuquotes Team on October 15th, 2009

You save money for your family because you are committed, responsible, and loving. You work hard to provide a comfortable home, good nutrition, and solid education for your children. Your future appears boundless, and your dreams are expanding. Life insurance is fundamental protection for your family's future.

Life Insurance for Your Family's Immediate Needs

Your family, weighed down with grief following your death, may have some immediate financial needs. Whether your death is unexpected or following a long illness, your planning will have spared them financial worry in those difficult days and weeks. There may be medical expenses. There will be funeral expenses and perhaps travel expenses for family members. Life insurance can ease their burden.

Life Insurance for Long-term Needs

Life insurance provides a financial safety net, ensuring that your family's long-term financial dreams will be realized because of your planning.

• Replacing your income provides ongoing support for your family. The benefit should generate enough income to pay for ongoing expenses. Ideally, the fund is large enough so that if it earns a conservative, fixed rate of interest, your family won't have to dip into the principal to make ends meet.
•  College education may be important for your children. A large enough life insurance settlement helps them accomplish that.
• Your spouse's retirement is another consideration. Sometimes the surviving spouse lives ten to thirty years longer than the deceased spouse.
• Estate planning with life insurance provides a legacy for your heirs. They won't lose the farm or other business to the IRS. The benefit not only pays the taxes but can help cover expenses until your heirs get their feet on the ground.

Life Insurance as a Tool

Life insurance is not primarily an investment. However, because of tax laws, it can be a tool to achieve many of your most important financial goals while you are still living.

Since term insurance does not have any cash value, you would need to buy a permanent policy in order to build a nest egg. You could then use your nest egg to save for future expenses or to carry you through rough times.

• Tax advantages are an attractive feature. You can build up significant cash reserves over many years and never pay tax on the gain.
• Saving for a long-term financial goal is another advantage. You can use the gain (without tax) and even borrow much of the cash value itself at low interest.

One of the best vehicles for long-term savings is the variable universal life insurance policy. You can invest money for your children's education, a vacation, new home, or for your retirement.

You can put your entire premium in a guaranteed interest account or you can invest some of it in mutual fund accounts within the insurance policy. Then, the closer you get to the time when you need to withdraw your money, the more you sweep into the guaranteed interest account. Finally, when you need it, you can withdraw the money that you actually put into the policy and even borrow some extra.

The advantage to you is that you never have to pay tax on the growth. If you wish to repay the loan, you may. However, if you don't wish to repay the loan, the balance will just be deducted from your death benefit--which also goes tax-free to your beneficiaries.

Life insurance provides so many benefits. Keep your fundamental finances strong. Be sure to talk with your professional life insurance agent to find out the best way to protect your family.

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