is a legal agreement between a policyholder and an insurance company, wherein the latter is obliged to pay death benefits to the policy's beneficiary at the death of the policyholder. However, before the insurer pays out the benefits, the insured must pay a certain amount of money (premium) during their lifetime, as stated in the agreement. This policy can help secure the financial future of your loved ones and ensure they are provided for in the event of your sudden demise.
The following are the five ways in which you can use life insurance benefits.
1. To pay for the funeral/ last rites expenses
Life insurance benefits can be used to pay your final expenses incurred after your demise. These include costs incurred on funeral preparation and burial, probate, or settling unpaid bills, like service bills. It can also pay for medical bills not covered by health insurance. This way, you can save your loved ones from the financial pressure of settling bills related to your final expenses.
2. To replace or add to the existing income
Your life insurance benefits can serve as an alternative source of income for your beloved after your demise. The benefits take care of major things like paying for college or paying a mortgage, among others.
3. As an inheritance to be passed down to your heirs
Life insurance benefits can be passed down as an inheritance if you have no assets to pass to your heirs. To do this, you need to name the heirs as beneficiaries of your policy.
4. Pay estate tax and inheritance tax
Another thing life insurance benefits
can be used for is to pay estate and inheritance taxes. This tax is paid on assets transferred from you to your heir after your death, following the assessment of the estate and the legacy received by the heir. In situations where your estate is transferred to your heirs, they do not have to pay for the resulting estate and inheritance taxes out of pocket.
5. To donate to charitable causes and institutions
Although it is not very common, life insurance benefits
can also be used to donate to charitable institutions. You can either donate a portion of the benefit or the full benefit. However, according to CCIM Institute, you must have a history of previous donations made to the organization before you can do this. The next step is to either name the organization as your beneficiary, just like naming other beneficiaries or transfer the policy to the organization. In doing so, the organization stated in your policy gets the insurance benefit in the event of your death.
is a valuable return on your investment. It provides the necessary financial security and guaranteed non-taxable income for your dependents in the event of your death. To get a more professional view on the life insurance policy, its' benefit, and what it can be used for, contact our insurance experts at Fuller Insurance Agency
. We are always available to help you with the right life insurance policy for your coverage needs. Reach out to us today!