Not everyone needs life insurance depending on how financially secure you are and if you have set yourself up comfortably for later on in life and if you are leaving a substantial inheritance for your survivors after you pass.
Article Quick Guide
Do I need life insurance?
Not everyone needs life insurance. It depends on if you have sufficient financial protection in place for your beneficiaries AND the financial protection is held in a TRUST, not an estate.
Sufficient protection, is CASH and/or bank accounts with at least as much money as your benficiaries need.
If you correctly set up a TRUST, you will completely bypass probate. If you have a will or if you have set up an ESTATE, which, depending on your state, will likely be stuck in probate for 1-12 months. Possibly 12-24 months, depending on family claims for the estate.
Probate Problems Show Need for life Insurance
Probate is the process/period of administering the deceased’s estate. Your state will essentially hit the “pause” button on the the disbursement of your estate, until the process runs its course.
Only after that can the capital, real estate, investments, etc, of the deceased can be transferred to the beneficiaries. Probate can be very expensive, depending on the estate, the various claims and the length of probate. It can cost hundreds of thousands of dollars, potentially, so you want to try to avoid it, if you can.
The good news about life insurance, is that if structured properly, it will 100% bypass probate and go straight to the beneficiaries. It can be funneled through your trust. Or, if you do not have a trust, you simply name your beneficiaries and they will receive the death benefit without probate delay, tax free.
Life Insurance is Tax Free!
That’s right, tax free. Life insurance is a great way to leave money to your loved ones, without any tax penalty. The ONLY time life insurance will be taxed, is if the money coming out of the policy (cash value or death benefit), gains interest/value This is not the case for most types of life insurance.
Two examples of life insurance policies that will likely be taxed because they have gains/interest, are certain types of universal whole life insurance and annuities. However, most policies, such as traditional whole life insurance or term life insurance, or accidental life insurance have no tax penalty.
The Burden of Final Expenses– You Don’t Need Them
The #1 reason people get life insurance is to pay for their final expenses. These are burial, cremation, funeral costs, other bills, other costs related to your funeral services or any financial gifts you wish to leave your heirs.
Without a life insurance policy, an uninsured’s could leave behind a bag of debt/expense to their beneficiaries.
It’s hard enough for most people to take care of their own expenses. It’s hard enough to grieve for someone that has passed. The last thing your loved ones should have to worry about is money. In many cases these direct final expense costs range from $7,500 – $25,000, depending upon final wishes, as well as other miscellaneous bills. Many times, getting the minimum amount of life insurance your loved ones will need, is surprisingly affordable.
For peace of mind and to get your affairs in order, contact us for a quote or a free consultation. We’re happy to help.