Advantages and Disadvantages of Life Insurance

Who will take care of your loved ones if something happens to you? If this is one of the questions that bother you, life insurance is the ultimate answer to your problem. It is a fact that a loss of a loved one is considered as one of the most traumatic experiences that might happen to you. However, if your loved one is left without sufficient money to meet their basic living needs or prepare for their future goals, they will have to cope with a financial crisis. Life insurance plan will ensures that your loved ones are financially secured even if tomorrow you are no longer around to care for them.

In the present year, there is no shortage of investment options for an individual to opt from. The modern day investments include mutual funds, fixed income instruments, property, gold and life insurance. Given the choices, it becomes important to make the right decision and choice especially when it comes in investing your hard-earned money. Life Insurance plan is unique investments that will greatly help you to meet your needs saves the important goals in your life and protect your assets. Here, you will know and learn the advantages and disadvantages of life insurance. Check these out:

Advantages of Life Insurance

Life insurance provides advantages and disadvantages that are not available from any other financial instrument however it also has disadvantages.

• Life insurance offers an infusion of cash that is intended for dealing with the adverse financial consequences of the insured’s death.

• Life insurance enjoys favorable tax treatment unlike any other financial instrument

• When it comes to death benefits, they are income tax-free to the beneficiary

• The death benefits may be estate-tax free if the policy is properly owned

• Cash values grow tax deferred during the insured’s lifetime

• Cash value withdrawals are treated on FIFO basis. The cash value withdrawals up to the total premiums paid are income tax-free

• Policy loans are also income tax-free

• Life insurance policy may be exchanged for another life insurance policy without incurring the latest taxation

• Most of the life insurance policies are flexible in terms of adjusting to the needs of the policy holders. The death benefit may be deceased at any time and at the same time the premiums may be quickly increased, skipped or reduced.

• A cash value life insurance policy may be thought of as a tax-favored repository of accessible funds especially if the need arises. Funds that are held in longer investments can earn higher return.

Disadvantages of Life Insurance

• Policy holders forego some of the latest expenditure to pay their policy premiums. Furthermore, life insurance is purchased for the benefit of others and indirectly for the insured individual

• The acquisition process of life insurance can be perplexing and annoying

• Life positioning of life insurance can be complex particularly if the insurance is for complex family situations, business situations and estate planning.

Before you decide to get life insurance, it is highly recommended that you have a clear and better understanding about the advantages and disadvantages of life insurance.