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Is Life Insurance Right for You?

Wed, Jun. 28, 2017 Posted: 12:10 PM


Most of us don’t particularly like thinking about life insurance. Naturally, facing the prospect of our mortality is less-than-comfortable. Yet, having a life insurance plan is simply a responsible choice, a way for you to provide for your loved ones in the event of your death.

As you consider financial planning and planning for your future, life insurance may be an important piece of your and your family’s financial plan. Although there are certainly some drawbacks to purchasing life insurance, there are many benefits that are simply not available from other financial instruments. Some of these benefits are obvious, some less so.

The Advantages of Life Insurance
The most obvious benefit, as you are probably aware, is that in the event of the insured’s death, life insurance provides an infusion of cash to named beneficiaries. The theory is that if beneficiaries—generally a spouse or children—are negatively affected financially by the insured’s passing, life insurance will mitigate the financial effects, at least to some degree. To put it bluntly, if you pass unexpectedly, of course, your family will grieve, but at least they won’t have the burden of worrying about how to make the next mortgage payment.

In many cases, beneficiaries use the funds from a life insurance policy for things like a college education. As the price tag for higher education continues to rise, naming your children or grandchildren as beneficiaries on your life insurance policy may be a way to ensure that you can pay for their college education, even after you are gone.

In addition, life insurance offers tax advantages that are not associated with many other financial tools. You should know, for example, that:

Generally, beneficiaries do not pay income tax on benefits associated with life insurance.
Death benefits resulting from life insurance policies may be free of estate taxes in some cases. You are able to take out loans against your life insurance policy. These loans against your life insurance policy may be income tax-free.

Cash values that grow from your life insurance policy may be tax-deferred during your lifetime.
Cash values that have accrued on your life insurance policy may be withdrawn on a first-in-firs-out basis. This means that if you withdraw cash that has accrued on your policy, up to the premium amount, these funds may be income-tax free.

Although these statements are generally true, there are some exceptions. Your agent at Columbia life insurance can certainly advise you further.

Many life insurance policies are flexible
In many cases, a life insurance policy can be exchanged for another life insurance policy or even an annuity without incurring taxation.

In many cases, the policy holder can decrease his or her death benefits at any time so that premiums can be reduced or even skipped.

A cash-value life insurance policy may be used as an account of easily accessible funds should the need for these funds arise. However, the assets backing these funds are typically long-term investments, providing a higher return on the premiums you pay towards the policy.

Many financial advisors consider life insurance a necessity, yet many Americans fail to purchase life insurance policies. The biggest reason they cite is that they simply cannot afford it. In most cases, however, affordable options are available. In fact, there are steps you can take to help find the best rates:

Many policies require a physical exam before giving life insurance. One easy step you can start to take immediately is to improve your physical health by simply improving your diet and exercising more frequently. This may work to lower the premium you pay for life insurance.

If you are a tobacco user, you should quit. Tobacco users generally pay higher premiums than others.
Working with an insurance agent and allowing him or her to shop around for the best rates is probably the most helpful strategy.

Although considering life insurance isn’t exactly anyone’s idea of fun, life insurance is an important part of your personal and your family’s financial planning.

George Smith