Exploring Life Insurance Options for Your Needs

Life insurance is sometimes seen as an unnecessary expense, but it can be a real lifesaver in hard times.

September is Life Insurance Awareness Month, and financial professional Jeff Bangerter from Bangerter Financial Services is explaining why it might be time to get serious about exploring your life insurance options.

Term Life Insurance

  • If you need a policy for a specific amount of time like 5, 10, 20 or more years, term life insurance may be a good option for you.
  • Term life insurance is also more affordable than purchasing permanent life insurance.
  • However, some temporary policies do have the option to convert to a permanent life insurance policy at the end of the policy term.

Permanent Life Insurance

  • As the name implies, permanent life insurance is meant to last your entire life
  • A permanent policy never expires, and in most cases, the premium doesn’t increase over the life of the policy.
  • Some policies also build cash value that you can borrow from or withdraw to pay for medical expenses or a kid’s college education.

Protection

  • Life insurance provides protection and security for your loved ones.
  • The average American household holds $144,100 in debt, so it’s important to consider how your family is going to pay off debt should something unexpected happen to you.
  • The most common reason to purchase life insurance is for the death benefit, which is paid out to the beneficiaries, usually tax-free after the death of the insured.
  • It can help cover immediate needs such as medical expenses and a funeral.

Tax Benefit

  • Life insurance is an important part of financial planning. Tax benefits come in a couple of ways: living benefits and death benefits.
  • If a person dies, the beneficiary of the policy does not pay taxes on the money because it’s considered income replacement.
  • For the most part, life insurance policies are shielded from taxation.
  • Some policies allow your money to grow faster, tax-deferred. Most of the time if you withdraw money, the money isn’t taxed.

Cash Value

  • Most people think of life insurance as a way to provide financial assurance for relatives when you die. However, many don’t realize you can use it to your advantage when you’re living.
  • Permanent life insurance can act as supplemental income. It may be more expensive than term life, but as a trade-off you are accumulating cash value.
  • You can borrow against or withdraw from the cash value later on.

How Much Life Insurance Do We Need?

  • How much life insurance you need is based on your personal and financial
    situation.
  • Consider how much you can afford. The younger and healthier you are, the less expensive it is. Your gender and occupation can also affect the cost of your policy.
  • A good rule of thumb is to have coverage that is 10-12 times your annual income.
  • Factor in other expenses such as debt, end-of-life expenses and dependents' everyday and future expenses.
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