Agents Tips for The Average Joe

Reasons You Should Consider Buying Life Insurance

Most people get to experience life insurance for the first time when an acquaintance or friend gets an insurance license. Most people take out life insurance policies to protect their families in case the insured, usually the breadwinner, faces an untimely death. Life insurance policies offer far greater benefits than only protecting your family from losing its earning potential. As a matter of fact, life-insurance policies are an excellent way of transferring risk from your family to an insurance company. In the event that a policyholder dies, insurance providers often do not bother on whether to pay out benefits of not since they are risk neutral due to the many policies they write. Even though this business is a win for both the insurance provider and the policyholder, there are other benefits of life insurance policies that require attention.

Transfer of risk is perhaps the most obvious benefit of taking out a life insurance policy. Every now and then, fatal accidents occur and have the unfortunate effect of causing extraordinary hardship, pushing families to financial distress. Hence, it makes a lot of sense to insure the life of a family’s breadwinner and consequently the family’s earning capacity. Traditional term life insurance policies provide compensation when the policyholder dies.

In contrast to term life policies that frame the traditional understanding of life-insurance, whole life policies combine a savings account with protection benefits. Premiums paid under whole life insurance policies consist of two parts i.e. compensation to the insurance company for accepting insurance risk and an accumulating cash value. The insurance company continues investing your money is your cash value built up over time while making premium payments. Because insurance companies guarantee the cash value, whole life insurance effectively combines regular savings at fixed premium prices with traditional life-insurance.

Policyholders get tax advantages. Whole life insurance policies can be looked at as investments, since insurance companies invest them in bonds or stocks or a combination of the two. Since the buildup in savings accounts is tax deferred, policyholders experience better growth rates investments in comparison to accounts that get taxed annually.

By taking the whole life insurance policy, a policyholder can have a structured savings approach. Whole life insurance policies not only mitigate the risk of losing earnings in case death occurs, they also help the policyholder save money. Since whole life insurance policies hold the insured accountable, forcing them to save part of their premiums regularly, even people that struggle to save money can benefit. On that note, life insurance can be an excellent pillar of anyone’s retirement savings.

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