Did you know? September is Life Insurance Awareness Month!
Most of us hear a lot about life insurance, but how much do you actually know about it? Knowing the basics of life insurance is an important part of understanding your financial picture.
Here’s some info to get you started!
What is life insurance?
Life insurance is pretty much exactly what it sounds like: insurance for your life. Just like you insure your house in case in burns down, you can insure your life so that there is a payout when you die.
Upon a death, life insurance pays out a tax-free lump sum to a beneficiary (or beneficiaries) of choice.
By naming a beneficiary, these proceeds bypass the estate, ensuring beneficiaries promptly receive the funds. Life insurance proceeds are not subject to probate fees, and are protected from creditors of the deceased’s estate.
Other personal assets like investments, art, jewelry, and other valuables that form part of an estate, are subject to tax and can take a lot longer to get to beneficiaries. Life insurance is there long before wills can be fully executed and estates settled.
Uses for Life Insurance
Everyone has their own reasons for purchasing life insurance. Some common uses are:
- covering financial liabilities, such as mortgages or loans
- replacing income to protect loved ones
- inter-generational wealth transfer
- providing for tax liabilities due upon death
- leaving a charitable legacy
Corporate uses of life insurance include:
- covering Buy-Sell provisions for business partners
- paying off business loans
- providing cash/financial protection for the business in the event of a death of a key employee
- as an estate planning tool for business owners and their families
Life insurance can also be used as a tax-sheltered investment tool for businesses and individuals.
Critical Illness & Disability Insurance
While we commonly think of life insurance for personal and corporate planning, critical illness and disability insurance are also a vital parts of a strong insurance and financial portfolio.
The financial impact of a disability or critical illness diagnosis on a family or a business can be significant, and the probability of suffering from a disability or a critical illness are higher than the probability of death during most people’s working lives.
Critical illness insurance helps protect individuals and their families, as well as businesses, in the event of a major diagnosis. Similar to life insurance, critical illness insurance policies pay a non-taxable lump sum to the insured to help cover costs that are not covered under other insurance policies.
Disability insurance protects an individual’s income when they are unable, due to either an illness or injury, to perform the main duties of their occupation. The monthly benefit would replace most of the insured’s income after a specified waiting period is satisfied. Disability insurance is not only for individuals to consider, but can also provide a monthly benefit to help cover business overhead expenses or support a business to help them replace a key employee who is off due to a disability.
To learn more about life, critical illness and/or disability insurance, and to make sure you and your family or business have the protection you need, talk to an experienced advisor. They will do an insurance needs analysis with you to determine the right type and amount of coverage, and identify and address any insurance concerns.
Celebrate life insurance awareness month by getting a life insurance quote from the insurance experts at Acera.