Do You Need Life Insurance

It can be very difficult to decide if you need life insurance. Life insurance can be an extremely onerous financial commitment and investment, and it will also last for a considerable period of time, so you should take careful consideration in deciding if it is the best way of achieving the financial and other goals you and your loved ones have

It can be very difficult to decide if you need life insurance. Life insurance can be an extremely onerous financial commitment and investment. It will also last for a considerable period of time. You should take careful consideration in deciding if it is the best way of achieving the financial and other goals you and your loved ones have.

Life Insurance Policy

Basically, a life insurance policy will cause a sum to be paid to the named beneficiary upon the death of the insured. This sum will generally be paid to the beneficiary, free of income tax. So in which instances is life insurance generally used above its alternatives? Well its primary role is to give death advantage protection in a tax efficient way. For example, if you would like to transfer wealth from your estate to your beneficiaries you can do it through life insurance.

You should now that it is still be liable to federal estate taxes. It can also be used to guarantee the continuation or protection of a business and to give financial benefits to your partners or employees who may otherwise be at risk financially. It also be used to support your family or other dependents that rely on your income during life. It can replace this income and support them in your place for a period. It can also be used to supplement retirement income in various instances when other contributions are not possible.

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Be Aware

You can access the money in your policy unless it is a Modified Endowment Contract. Moreover, it will be federal income tax free. This applies as long as you make the withdrawal by borrowing against the policy. Ensure you do not exceed what you have paid into the policy. Withdrawals from an MEC are subject to federal income tax on the gains they have made. There is an additional 10% tax in certain situations.

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You should be aware that all withdrawals and loans against a permanent life insurance policy would reduce the policy’s value and the amount of any pay out upon death of the insured. There also are various fees and penalties associated with accessing the money early so you should be aware of these and if they are very onerous, you may wish to look for another source of funds so that you don’t have to fall prey to these. Also, if your policy is invested on your behalf, the amount available for withdrawal or loans be less or more than what you have paid in, depending on how your investments do.