Everybody knows the main reason you purchase life insurance is to provide a lump sum of money to maintain your family’s wellbeing when you die.
Many people don’t realise, however, the true extent of the good this payment can do, and the multitude of problems it can solve – both before and after you pass away.
Below are the top four ways that purchasing a life insurance policy can actually make you a better person.
#1: You Can Give It to Charity
Have you been racking your brain trying to find a way you can make a real impact for the causes you love and support?
Nominating a charity to receive part of or your whole life insurance policy when you die is one long lasting way to give that many people don’t often consider.
There are two ways to give your life insurance policy to charity.
The first is simply listing the charity you want to support as your beneficiary. If you have a policy that allows for a negotiable beneficiary, listing a charity as your beneficiary means you don’t give up potentially accessing the value of your policy when you’re still alive, should you need it.
Alternatively, the second way to donate your life insurance policy to a good cause is by transferring the ownership of your policy to a charity. While this means the charity has control when they cash out the value of the policy, it also means that your payments may be tax deductable. This can be a very advantageous way to dispose of a policy that, because your circumstances have changed, you no longer require but do not want to just cash out.
Either way you swing it, there is only one downside to donating your life insurance to charity: You won’t get the satisfaction of having your contribution recognised while you are living.
But, you will still leave a lasting legacy that you may not otherwise have been able to achieve.
#2: Life Insurance Helps You Protect Your Family
Life insurance is for the living. The life insurance policy you leave behind actually has nothing to do with you – it’s designed to help those you love. Just a few of the ways life insurance will help the finances of your beneficiaries after you pass away include:
- Providing the funds to cover funeral expenses
- Paying for any unsettled medical bills you might have if you die as a result of illness or an accident
- Paying for potential estate taxes incurred upon death, so that precious family assets do not have to be sold
- Taking care of outstanding debts including the mortgage on your family home
- Funding your children’s education
- Allowing your family to continue in their routine without the financial hardship of living without your income
In Australia, the time it takes to pay out the lump sum of a life insurance policy is usually 7 to 14 days. With life insurance, your beneficiaries usually won’t even feel the pinch of missing the next pay check after you pass away.
#3: It Keeps Families Unified After Death
So many beneficiaries are contesting wills around the world that a whole industry of “deceased estate litigation” has emerged.
If you want to make dispersing your assets when you pass away as pain-free and fair as possible, a strategically valued life insurance policy is a must-have.
How can a life insurance policy help you distribute your wealth fairly?
Consider this example: There are two people that you want to receive equal portions of your net worth, but you do not want your property to be sold. By nominating one person in your will to receive your property, and the other to be the sole beneficiary of a life insurance policy that is of equal value to the property, you can make sure both parties get an equitable share.
By making these preparations before you pass away, you’ll ensure that a time of grieving doesn’t come with extra suffering and conflict.
#4: Life Insurance is a Sign of Financial Maturity & Security
Depending on the type of policy you purchase, once your life insurance has accumulated you may be able to either borrow against the value of your policy or withdraw your funds.
Terminating your policy while you’re still alive will mean you are given the money that’s been invested on your behalf (after termination charges are deducted). You can use this money to:
- Invest in a new business venture
- Pay debts and avoid acquiring a bad credit rating
- Fund your retirement
- Support your family through an emergency
Purchasing life insurance is a sensible backup plan for unforeseen circumstances. Having the right policy can help you avoid borrowing money from friends and family, signing up to high-interest loans you may not be able to pay in the future, or in the worst case scenario, facing business closures or bankruptcy problems.