The Positives of Life Insurance
People do not always view life insurance in a positive light. The fact that life insurance is closely associated with dying can have negative connotations for some, and as with virtually all types of insurance, it may be seen as a necessary evil. However, life insurance does include many positive features for policyholders as well as their beneficiaries.
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Immediate Estate
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Life insurance provides an "immediate estate," a source of fast cash to the policyholder's beneficiaries upon his death. The money can be used to pay for the policyholder's final expenses, such as the cost of his funeral and any fees or expenses associated with settling his estate. Any remaining funds can be used to cover the beneficiaries' ongoing living expenses. In most cases, the beneficiaries receive the money on a tax-free basis.
Affordable Alternative
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Many people don't have adequate assets to leave for their beneficiaries upon their death. In many cases, surviving family members may need hundreds of thousands of dollars to replace what the policyholder would have earned during the remainder of her working years. Life insurance is often the most affordable means available to the policyholder to provide the missing income. The death benefit dollar amount of the policy may be far greater than what she had paid in total premiums at the time of her death.
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Forced Savings
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In addition to the death benefit for the beneficiaries, some forms of life insurance, such as whole life, universal life and variable life, also offer a living benefit to the policyholder in the form of accumulated cash value. The policyholder can take out some of the cash in the form of a low-interest loan that he is not required to repay, although any outstanding balance plus interest would be subtracted from the death benefit when he passes away. For policyholders who have difficulty saving money, this element of "forced savings" allows him to accumulate cash simply by making timely premium payments.
Peace of Mind
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For the policyholder, life insurance provides the intangible benefit of having peace of mind. She can sleep better knowing that if something happens to her, money is available to help her family maintain the same standard of living, even though her income is no longer available to them. Her spouse will be able to make the mortgage payment or possibly pay off the mortgage with the insurance proceeds, as well as pay for the children's college education.
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References
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