The Basics of Life Insurance

Life insurance is an important financial tool, providing financial protection for you and your loved ones. If you pass away, your beneficiaries will receive money for their personal needs. You can purchase life insurance at any time of your life or for specific events. If you need coverage only temporarily, term life insurance is an excellent choice. Term life insurance provides a death benefit and guaranteed payments for a set period. Permanent life insurance, on the other hand, provides level premiums, strong guarantees, and cash value building. You can learn more at Miller Hanover Insurance in Hanover, PA 

Life insurance is a legally binding contract between you and an insurance company. Upon your death, your insurance company will pay the designated beneficiary a lump sum of money (the death benefit). You can use this money for whatever you want, including paying your mortgage, college tuition, and other expenses. If you have young children, life insurance is an excellent way to provide for their needs.

Term life insurance policies last a certain period of time and are designed to protect your family from a loss of income in the event of your death. Permanent life insurance policies, on the other hand, last for your entire lifetime and have a cash value. The difference between the two is that term life insurance is not guaranteed to pay out the amount of money you paid for it.

Term life insurance is inexpensive and provides protection for a limited period of time. Typically, term life insurance policies last between ten and 30 years. They are also sometimes called pure life insurance since there is no cash value component to them. The payouts from term life insurance are tax-free. It is also a great choice for those with children or married families.

Income tax ramifications of life insurance are complex, and any change to tax laws is possible. However, the cash value of a life insurance policy can increase without taxation until the policyholder withdraws it. Moreover, a large deposit of premiums may cause the contract to be considered an endowment contract by the IRS. This may negate many of the tax benefits of life insurance.