What consumer benefits does life insurance offer?

It would be an understatement to say that life insurance is one of the most important aspects of financial management. However, most people have narrowed its use to its obvious benefits.

However, it means much more than what is seen.

Below are some of the less discussed benefits of life insurance.

1. Tax-free withdrawals

If you die prematurely while covered by life insurance, the payout your family will receive will be tax-free. This is because life insurance expenses are not covered by income tax and are therefore tax exempt. For the same reason, your family doesn't have to report this on their annual tax returns.

2. Peace of mind

If you have life insurance, the chances of your family not having to worry about paying will increase. However, this comes at a price. Your insurance policy must be at least eight to ten times your annual income. If this is a box you can easily tick, your loved one can live a carefree life after you.

3. Final cost.

With rising inflation, a decent funeral can cost anywhere from $6,000 to $8,000. It's no secret that most families don't even have the funds to deal with medical emergencies, let alone pay for funerals.

However, this may not be the case if you buy life insurance. If you die prematurely, your family can use the money to give you a proper goodbye without going broke.

4. Chronic disease insurance.

Although it is generally believed that the only payout from life insurance is when the policyholder dies. Contrary to popular belief, you can adjust your existing life insurance. This will allow you to spend some or all of your expenses on the treatment of your terminal illness under certain circumstances. However, this is not a very smart move. A better approach is to apply for separate health insurance to treat health problems.

5. Alternatives to aged care services

If you hold one of the above policies, you can withdraw or borrow funds at cash value to meet your financial needs. It is better to opt for cash value loans as they have very low interest rates. Needless to say, if you cancel before then, the total present value of the policy will be reduced.

The Bottom Line.

Contrary to popular belief, life insurance isn't just for the rich. People can get a policy that falls within their personal income range.

The benefits of life insurance to consumers outweigh the associated disadvantages. If you are the sole breadwinner of your family and don't want your loved ones to have to take care of your finances, buying an insurance policy is the best option.