Life insurance provides protection for family and loved ones in a way that is similar to home or auto policies. There are currently over 772,000 individual policies in effect. The industry pays out nearly $1.2 billion to beneficiaries each week. Over $3 trillion has been invested by individuals in different types of policies including annuities. The types of policies that are available range from simple term agreements to investment policies that can accrue revenue over time. There are several important reasons why everyone should have some type of policy in place.
Cover Funeral Expenses
One advantage of this type of policy is that the money can be used to cover funeral expenses. Even the most basic policies will supply enough money to cover most or all of the costs of a funeral. This is important because the cost of funerals and even cremations have been steadily increasing. Friends or family might not have the finances available to pay for this type of sudden expense. Certain policies even allow a person to purchase a funeral in advance so that the costs, ceremony and other options are already selected and paid for far in advance.
Financial Security for Family
Individuals who are survived by a spouse, children or an extended family could leave the household in a bad situation if the insured was the only person earning a significant income. One of the primary purposes of some life insurance policies is to provide financial benefits to family members or dependents. The benefits are usually a sum of money that can pay for medical bills, household expenses and utilities until the family can adjust to the loss.
Some policies that include annuities or other instruments could actually pay a beneficiary a certain amount for several years.Tax Benefits
There are many complex laws that deal with estates and inheritances. Some can delay payments to family members after a death. Others could actually absorb some or all of the money that was intended for surviving relatives. Policies that cover life are much simpler to deal with and have some tax benefits. There are situations where taxes could be deferred for years until a child comes of age. Families can often benefit from these types of policies because it guarantees that a spouse or child will receive the money as intended. The money can even be targeted for a specific cause such as tuition or a mortgage.
Potential Investment Revenue
Certain life insurance policies are different from home or auto policies. Some policies actually act like an investment up until a certain point. The funds in these policies can be invested in bonds, stocks or other financial instruments. The policy slowly accrues revenue over the course of many years or even decades. This money can be left in the policy and given to the beneficiaries. Some insurers will absorb extra investment revenue above the face value of the policy. Selected policies allow the insured individual to withdraw the additional revenue from the policy before death. This money can help to pay for medical bills or other emergency expenses.
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