Helping to replace lost income is just one of the many benefits of life insurance. Here are nine reasons why having a life insurance policy can be important for the future well-being of your family supporting charitable causes.
1. Financial Protection
Life insurance is meant to help protect your family’s financial future. Buying a life insurance policy helps protect your family’s financial stability in the event you pass and could help mitigate the stress and burden of an already difficult time. Even if you have savings, it’s unlikely that it would be enough to cover your family’s expenses for several years or even decades if something happens to you unexpectedly.
Typically, there are three types of life insurance options to consider: term life, whole life, or universal life. Death benefits are typically paid in a lump sum payment. This money can be used to cover expenses like medical bills, funeral costs, outstanding debts, mortgage payments, and tuition.
At a time when your loved ones are already dealing with your loss, life insurance can help ease some of the financial burdens and provide a financial safety net.
2. Income Replacement
Whether you have a 9-to-5 job, are self-employed, or own a small business, your current income might cover a portion or even all of your family’s daily needs. Housing, food, utilities, clothing, car maintenance, outstanding loans, and health care premiums are likely all part of your monthly budget.
3. Access to Cash
Some types of life insurance —like whole life and universal life — offer you the added benefit of cash value. As you pay your life insurance policy premiums, the life insurance company invests this money, allowing you to build cash value in the policy over time.
In the future, this cash value can be available to you through policy loans and withdrawals to take care of temporary financial needs or unexpected expenses, like a major car repair.
Building cash value in a permanent life insurance policy is one way to create an extra emergency fund, offering you additional financial security knowing that you can withdraw or borrow your cash value whenever you need to.
4. Financial Stability
One of the most important benefits of life insurance is that it can help provide greater peace of mind, knowing that your loved ones will be taken care of in case of untimely death.
Your family could use some of the death benefit from your life insurance policy to help pay for these funeral costs. The policy’s beneficiary could direct some of the death benefits to the funeral home for final expenses, or they can pay out-of-pocket and use the death benefit as reimbursement for these expenses.
5. Legacy Planning
Many people choose to use life insurance to leave a legacy for their loved ones or their favorite charitable cause. When selecting your life insurance beneficiary, consider to whom or what you want to leave your death benefit. For example, if you have children, life insurance can help your family pay for future childcare and education expenses, especially for college tuition.
6. Supplemental Retirement Income
Life insurance also can be used to supplement your retirement income in a couple of ways. Permanent life insurance (either whole life or universal life) allows you to build up cash value, which you can borrow against and use as a supplemental source of retirement income.
7. Health Benefits
Life insurance riders, which can offer you important health benefits, are options that allow you to personalize your insurance coverage. Various riders can provide you with financial support in case of serious illness or disability or the need for long-term care.
Some common life insurance riders include waiver of premium, accelerated death benefit, critical illness, and long-term care. With a waiver of premium rider, your life insurance policy will not lapse for a certain amount of time if you are unable to pay your premium because you become disabled and unable to work due to an injury or illness.
