In the UK, only around 30% of the population has life insurance – a surprisingly low number.
Although the most obvious benefit of purchasing a life insurance policy is to make sure your family remains financially stable if you pass away, did you know that having life insurance also comes with other benefits?
1. It Often Comes with a Free Gift
A small benefit of taking out a life insurance policy is that insurance companies often offer gifts just for signing up.
The best life insurance with free gift deal is a great incentive to take the next step if you were already considering purchasing a life insurance policy. These gifts are usually gift cards from Amazon – the amount you receive usually depends on which policy you choose.
2. The Payouts Are Tax-Free
You probably already know that your beneficiaries will receive a lump sum death benefit if you pass away while your life insurance policy is in effect – but did you know that payouts from your life insurance policy will be free from tax debt?
That’s because life insurance payments aren’t the same as income, so your beneficiaries aren’t required to report the payout on their tax returns.
3. Life Insurance Covers Final Expenses
In the UK, the average cremation costs around £3,885, while a burial costs around £5,000 – which is a substantial financial burden to place on your loved ones.
Having a life insurance policy means that your beneficiaries won’t have to use their own savings or credit because they can use the payout to cover your funeral costs.
Another option is purchasing a final expense policy – these policies usually have low monthly premiums for small coverage amounts.
4. It Protects Your Loved Ones
The most common reason people take out a life insurance policy is to protect their loved ones. If you pass away and have dependents who rely on your income, a payout from your life insurance policy will ensure that your family is taken care of – especially if you have young children.
In cases where a partner would be in financial trouble if their partner’s income was discontinued, a life insurance policy can replace that income for them.
A life insurance policy is a way to safeguard family members if their income is dwindling due to advancing age, if they are involved in an accident, or if they are retirees. A bereaving family shouldn’t have to worry about covering their living expenses.
5. It Can Cover Chronic and Terminal Illness
Most life insurance providers offer additional benefits, called riders. Riders can be purchased and added to an existing insurance policy. Riders are designed to cover risks that are not included in the original life policy – making the plan more comprehensive.
You can choose to add riders that cover chronic and terminal illnesses or personal accidents. Other riders include accelerated benefits that will allow you to access a portion of your death benefit (or the entire amount) under specified circumstances.
For instance, if you discover that you have a critical illness and your life expectancy is 12 months, you can access your death benefit to pay for other household expenses.
6. It Can Supplement Your Retirement
In addition to providing death benefits, universal, whole, and variable life insurance also accumulates cash value that increases over time.
You can use this cash value to cover other costs, such as making a down payment on a new car or buying a home. It can also supplement your retirement savings.
The Bottom Line
A life insurance policy isn’t a luxury, it’s a necessary component of sound financial planning.
Life insurance is a powerful tool that minimises risk and safeguards your loved ones when you pass away. Your family won’t have to worry about covering the cost of your funeral or their living expenses, and the cash value it accumulates can also be used to supplement your retirement in your later years.