The main reason that is advanced to buy life insurance is to provide protection to your dependents in case something happens to you. There is no doubt that this is the most important reason why you should buy a life insurance policy. You are also told that life insurance is a good way to plan for your child’s college education or your own post-retirement life. However, this is not all. You need to fully understand how life insurance helps you if you are to make proper use of it.
One major benefit that life insurance brings is a methodical increase in cash value of the premium. This benefit is available under some permanent life insurance schemes. Under these schemes, a part of your premium goes towards insurance protection and other costs while the remaining increases cash value. Such an accumulation helps in achieving long-term goals
Another benefit is that every insurance company stands guarantee for the cash value of the policy when it comes to permanent life insurance. This makes it advantageous to add on assets that you want to keep secure, without any risk.
You also have to see that no taxes are levied currently for any increase in cash value. You also have the option of ‘partial surrenders’, where you can withdraw a part of cash value permanently. If these withdrawals are not in excess of the total premium amount paid, they are taken as untaxed returns of your premiums. If they do exceed the total premium amount, they become taxable income. Also understand that a death benefit your beneficiary receives is exempt from income tax.
Lastly, as the cash value gets accumulated, two vital areas of your financial planning bear fruit. These are asset accumulation and insurance protection. Some life insurance policies also provide you the option of linking your death benefit (face value) to the cash value growth, by which the insurance protection increases for every dollar of asset accumulation. These advantages help your insurance protection be on par with inflation. You can get the help of your financial advisor in evaluating the benefits of asset accumulation through life insurance. The financial advisor can help you obtain long-term gains through insurance. This is as important because a professional can optimize your life insurance investment.
This is an investment that every American must make, not only in his own interest but also in the interests of his family members.