Reasons why you should consider buying life insurance

 

Reasons to buy insurance are different for everyone. But the decision to purchase insurance is, at its core, all about providing financial security for yourself and the ones you care about. Learn why life insurance is important, and who needs it.


Why is life insurance important?

Buying Life Insurance protects your spouse and children from the potentially devastating financial losses that could result if something happened to you. It provides financial security, helps to pay off debts, helps to pay living expenses, and helps to pay any medical or final expenses.

Life insurance provides cash when you need it most.

Your life insurance policy can deliver a specified sum of money when you need it. Upon your death, your family will receive your policy payout immediately. And that death benefit is generally not subject to federal income taxes. For example, a $500,000 policy provides $500,000 in death benefit proceeds directly to your beneficiary.

Steps in the insurance buying process:

1. Determine your goals, determine how much insurance you need to meet your goals over time, and determine what you can afford to pay.
    
2. Learn what types of insurance can help you meet your needs.
    
3. After considering initial premium payments, any possible increases in premiums over time, any additional death benefits,1 and any living benefits2 that can be utilized before you die, choose the type of insurance policy (or combination of types) that best meets your needs.
    

Remember, working with a financial professional can help make this whole process easier. A financial professional can help explain the differences between types of policies, help you calculate the amount you need, and present potential options that may best suit your needs.

 

Why get life insurance?

Life insurance can give you lasting peace of mind in terms of the assurance that you have provided a legacy. That’s because the right coverage can offer a valuable combination of benefits, many guaranteed by the claims-paying ability of Life Insurance Company—so that you and your loved ones know exactly what you’re getting.3 Of course, you have to make a long-term commitment to paying premiums and keeping the policy in force.  Some of the most common reasons for buying life insurance include: 

1. Guaranteed protection
If you have a family, a business, or others who depend on you, the life insurance benefit of a whole life policy acts as a financial safety net. When you die, your beneficiaries will receive a lump-sum payment that is guaranteed to be paid in full (provided all premiums are paid and there are no outstanding loans). It’s essential protection that you can count on to be there for your loved ones when needed.

2. Income replacement
Imagine what would happen to your family if the income you provide suddenly disappeared. With whole life insurance, you can help make sure that your loved ones have the money they need to help:

• Pay the mortgage
• Afford childcare, health care, or other services 
• Cover tuition or other college expenses 
   
• Eliminate household debt
   
• Preserve a family business

3. Tax-free benefit
Your beneficiaries will be able to enjoy every penny you leave them. That’s because the benefit of a life insurance policy is generally passed along federal income tax free.

4. Guaranteed cash value growth
As you pay your premiums, your Whole Life policy builds cash value that is guaranteed to grow—tax deferred—and can help meet a variety of financial goals: 

• Supplement retirement income 
• Fund a child or grandchild’s education 
• Pay off a mortgage 
• Protect existing assets 
• Establish an emergency fund 

5. Dividend potential
One of the benefits of purchasing whole life insurance is that you will be eligible to receive dividends.4 Although they are not guaranteed, when dividends are awarded, you can take them in cash, use them to offset your premiums, or use them to buy paid-up additional insurance that increases your coverage and cash value, use them to offset your premiums, or take them in cash.

6. Optional riders
There are several ways to tailor a whole life policy to meet your individual needs. For an additional cost, you can use riders to purchase additional protection without further underwriting, to pay your premiums if you become disabled, to use some of your face amount to pay for chronic illnesses, or to purchase coverage for your children. Your agent can help you decide if any of these riders are right for you.
 

1 The life insurance death benefit is the amount that is paid when the policy is in effect and the insured dies. The insured is the person whose life is covered under the policy. Accessing the cash value of a Whole Life policy for special expenditures will reduce the available cash surrender value and the death benefit.
2 A living benefit is any benefit the policy owner can access while the insured is still living. Not all life insurance policies are designed to offer living benefits.
3 All guarantees are based on the claims-paying ability of the issuer.
4 Dividends are not guaranteed. 

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Living Benefits of Life Insurance

A cancer diagnosis upended the family and finances of the Venables. Life insurance helped to keep them solvent and paved the way to a life filled with hope. Learn how those living with a terminal illness can alleviate some financial stress by using their Living Benefits Rider to make withdrawals from their life insurance policies. 

David Smith is feeling particularly grateful for all the blessings he has received, both big and small. That’s because he has been living with a rare cancer much longer than anyone could have predicted. It hasn’t been easy. Initially, he and his wife, Sarah, managed to keep up with his medical expenses and their household bills. Eventually, though, they couldn’t keep up any longer. They didn’t know where to turn.

Life insurance before the cancer diagnosis

Like many people, David and Sarah had assumed their life insurance would benefit their beneficiaries after they were gone. But life insurance can often be an important financial resource before death. In this case, David and Sarah had opted for the Living Benefits Rider (LBR) in their Life policy, then forgot about it. The rider allows policy owners with terminal illness to access their death benefits while the insured is still living.

Fortunately, a few years after David’s diagnosis, he and Sarah met with their local financial professional, Tom for a routine review of David’s Life policy. Tom knew his client was ill, but he didn’t realize just how dire David and Sarah’s financial situation had become.

Tom reminded the couple of their decision, which had seemed minor at the time, to add the LBR at no cost. David and Sarah were stunned and relieved to learn they could tap into David’s death benefit. Suddenly, they were able to manage their expenses. “I had no idea that [the LBR] could have such an impact on somebody’s life,” Tom said.

 

How to use life insurance while alive
 
The living benefit rider is a feature that you can add to your life insurance to give you the option to access a portion of the death benefit while the insured is still alive if they are diagnosed with a terminal illness with a life expectancy of 12 months or less. The rider can give you financial support during times of serious illness, critical medical conditions, or other specified events.

To use the rider, you should review your life insurance policy to familiarize yourself with the specific details and conditions of the Living Benefits Rider, such as eligibility requirements, types of qualifying events, and any limitations or exclusions mentioned in the policy.

If you’re eligible, your next step will be to contact your insurance company and inform it of your intent to exercise the Living Benefits Rider. Company representatives will walk you through the process and make sure you file the required claim forms. Be prepared to provide documentation, such as medical reports and test results, to support your claim.

The insurance company will evaluate your claim based on the information you provide. (It may require an assessment by an independent medical professional to confirm your condition.) The duration of the approval process may vary depending on the complexity of your claim and the insurance company’s policies.

If your claim is approved, you will receive a payout from your life insurance policy’s death benefit. The amount you can access depends on your policy’s terms, and the amount you access will reduce the remaining death benefit and available cash surrender value. It’s important to note that the payout may be subject to certain fees and taxes, so work with your financial professional to understand the potential impact.


Adding a Living Benefits Rider can be a lifesaver

The Living Benefits Rider provided more than financial relief. “I noticed a change in David’s tone, his emotional state,” said Andrew Jefferson, David’s oncologist and friend. “It’s been a great thing for him and Sarah, just to focus on getting well and not worry about finances.”

David agreed. “This life Insurance Company experience opened our lives back up. We can now spend more energy on love and purpose, and less on fear and anxiety.”

“My approach is holistic,” Tom said, adding that he always recommends that his clients opt for the Living Benefits Rider. “We don’t assume the worst is going to happen, but life changes.”

David completed his expensive treatment, and he and Sarah continued to work at their small business. David has lived to see many family milestones. And he and Sarah recently reached a milestone David didn’t think he’d live to see: retirement. “We are living in a very joyful place, and our life insurance company has been a key ingredient in that joy,” David said.

 

Want to learn more about life insurance benefit riders?

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