Life Insurance / Peace of Mind?
Life insurance is a contract between a life insurance company and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to one or more named beneficiaries when the insured person dies in exchange for premiums paid by the policyholder during their lifetime.
Types of Life Insurance
- Term life insurance policies expire after a certain number of years.
- Whole of life insurance: can cover you for the whole of the rest of your life and will pay out whenever you die. As the policy doesn’t have a fixed end date, your loved ones receive money from the policy, providing premiums are paid and the claim is valid. On the one hand, the advantage of this type of life insurance is the security of a guaranteed payout regardless of when you pass away, but on the other hand, premiums are generally higher for this type of insurance.
What are the benefits of having Life Insurance?
Life insurance can offer several benefits to you and your loved ones, including the following:
- Peace of mind
One of the main benefits is having peace of mind that your family has a financial safety net if you die. This may be particularly important if your partner or children are financially dependent on you.
A critical illness policy may also provide peace of mind by helping you meet your financial obligations if you are unable to work due to serious illness or injury
- Financial Security
When you buy a life insurance policy, the insurance company charges a premium in exchange for providing financial security to your beneficiaries in case of an unfortunate event of death. The proceeds from life insurance can be used by the beneficiaries as an income replacement to cover day-to-day expenses.
- Wealth Creation
Some life insurance plans offer you the option to invest and grow your money. This enables you to stay financially prepared for your future needs. Life insurance can offer good returns and income.
- Tax benefits (Subject to the country of residence and domicile)
Life insurance plans offer multiple tax benefits. In the unfortunate even of the insured’s demise, their beneficiaries will receive a lump sum death benefit (i.e. a payout to the beneficiary of a life insurance policy). Life insurance payouts are not considered income for tax purposes therefore beneficiaries do not have to report the money when they file their tax returns.
Protect your beneficiaries from Inheritance Tax
Writing life insurance in trust means the money paid out from your policy should not be considered part of your estate.