In a world full of uncertainties, it is always wise to stay one step ahead and protect the best interests of yourselves and the ones you love. Life insurance as a concept is not new and has come to be known as merely an insurance tool. Life insurance can be understood as a risk protection instrument that helps to protect the financial interest of those close to a person post their death. A life insurance policy is taken and an agreed-upon premium is paid by the policyholder who nominates an individual to claim the insurance amount upon the death of the policyholder. This tool helps secure the future monetary interests of close family members of the deceased in the event of old age or unexpected demise.
Why Opt For A Life Insurance Policy?
The importance of an insurance policy in today’s world cannot be disputed. From securing our goods to health expenditure and even our own life, insurance is imperative to ensure the well-being of ourselves and our loved ones to share and protect ourselves from any possible risk. Some of the most important reasons to consider getting a life insurance policy include:
- An important savings plan: Not just in death, but life insurance policies can also be a great source of income following your retirement providing you with a stable source of income.
- Protect your loved ones: Death is uncertain and to ensure that our loved ones are taken care of and provided for. Life insurance serves as the perfect way to ensure that your family is taken care of financially.
- Realizing long-term goals: Life insurance can be a great way of achieving your lifelong dreams post-retirement by providing you with lump-sum amounts. It is perfect if you are looking to buy a plot of land or set up a business or even buy a house. But not all insurance plans work for everyone, so it’s best if you find the right life insurance quote by talking to your agent.
- Tax benefits: Purchasing life insurance not only secures the interest of you and your loved ones but can also help secure your position financially and offer short-term gains by acting as deductions thereby reducing tax liabilities. Life insurance policies also offer long-term tax benefits.
How To Choose The Correct Life Insurance?
There are a lot of factors to consider while choosing life insurance. From risk to premium and policy amount, there are many things to consider before purchasing life insurance.
- Insurance Period: Based on your plans, you might want to consider the duration of the insurance policy. Long-term policies typically offer higher returns. If you want for the policy to pay for a loan or liabilities, consider purchasing a policy for that duration for the policy to mature accordingly.
- Premium: It is desired to have a large claim however that calls for a higher premium which may be difficult to accommodate in a small budget. Consider getting a policy looking into the premium and the affordability factor.
- Factor in Inflation: While off the bat a policy might appear to have a very big payout, all too often it does not pan out as a viable option while factoring in inflation. Before purchasing a policy, you need to ensure that your premium and the resulting amount are adjusted to consider inflation and decide on a policy that gives a fair sum even a couple of years down the lane.
- Understand the procedure: Laying hands-on insurance claims can be a tricky task. With a vast amount of formalities, procedures, and paperwork in the way, it can take a long time for the nominees to finally get the sum. Before purchasing insurance, look into all the details relating to procedure, compliance and opt for a policy that is most likely to make the process easier.
I Thought Life insurance was for securing my family’s future! How Can It Become A Source Of Future Income?
A life insurance policy has multiple advantages as it helps leverage risk and protects your future interest to a certain extent. Additionally, joint life insurance also works ideally for couples and can help in assisting those who’re close to the deceased post their demise. A common fact not known is that taking a life insurance policy is more than just securing your loved ones against uncertainty in the future but it can also be considered as future income. Continue reading this article to understand why you must consider life insurance as future income and what are advantages of it.
1. Considering Tax Liabilities
Income and tax go hand in hand. Where there is an income there most certainly is a tax and all too often one might find that a significant portion of their income is reduced due to impending tax liabilities. One of the biggest advantages is the absence of any tax liability on income arising from the encashment of a life insurance policy. As per Canadian income tax provisions, the beneficiary of a life insurance claim be it a spouse, child or parent does not have to disclose proceeds from the insurance claim as income. The best life insurance policies of Canada are for the most part exempt from tax. It is to be noted that if you fail to appoint a beneficiary, the appointed beneficiary may bear some tax liability. Additionally, the use of your life insurance policy as collateral for a loan may also attract some tax liability. An outstanding loan balance exceeding the amount paid into the policy may attract tax liabilities. The sale of policies that are permitted in certain locations in Canada will also attract liability to the seller on the amount received upon sale.
2. Guaranteed Income To Beneficiary
The sudden death of a loved one is a shocking thing and leaves the close family members in a rather displaced position. A life insurance policy, therefore, plays a crucial role in supporting and catering to the financial needs of those family members who are not financially independent by acting as a stable source of income. By taking a good life insurance policy, you can help provide for the future income of your family members and provide for a stable and comfortable amount of payment in the future. An insurance policy is especially great if the beneficiaries are elderly or unoccupied spouses or minor children.
3. Consider Life Insurance As A Future Investment
An investment is an instrument that calls for payment of a certain sum of money over fixed durations to avail either short- or long-term gains. A Life insurance functions just as an investment by providing a return t a future date upon payment of a premium in the present day. Life insurance can be viewed as a long-term investment opportunity that is not only tax-free but also offers tax deductions over years. Apart from the tax exemptions offered, Life insurances also function as extremely secure forms of investment with no other risk factor to consider as opposed to the case of stocks and shares. An insurance policy functions as a long-term investment opportunity eliminating the future risk with an assured sum of benefit that does not attract any tax liability making it one of the most viable and secure forms of investment to protect the interest of loved ones.
4. Lump-Sum Cash
A life insurance policy provides for lump sum benefits at a go providing for ample returns at a single go. Additionally, one may opt for different insurance schemes that provide for a periodic payout mechanism wherein the nominee receives a payout in periodic instalments allowing for a more stable and routine payout. An insurance policy works by providing the nominee with a predetermined amount that does not imply any tax liability. This makes for a very secure and smart long-term investment especially if the nominee is a dependent individual without a secure source of income.
Life insurance is no longer merely a tool to help mitigate risks and has evolved to become a comprehensive investment opportunity that is suited for all. The wide variety of life insurance policies with different maturity periods and claims and payout structures make it easy for everyone to find a policy to suit their long-term and short-term goals. Life insurance is the ideal tool to help make for a secure future without compromising on anything in the present. With the right policy, you will not only obtain a good return on investment but also a sense of protection and cover for you and your loved ones in the event of unfortunate and unpredictable events in the future. Additionally, it works out a lot cheaper to purchase a premium at a younger age as it will call for a lower premium cover. Certain life insurance policies also cover your business and in the event of the demise of the policyholders. Joint insurance policies are ideal for couples of partners working together in a firm. Keeping in mind all the advantages and the multitude of benefits of having a life insurance policy, it is best to find the right life insurance quote for you and your loved ones at the earliest.