Photo KnowInsiders
What Are Benefits Of Life Insurance? Photo KnowInsiders

Life insurance isn’t just for the wealthy. No matter your income level, life insurance can ensure that your loved ones could make ends meet if you were to pass away. And, life insurance might be more affordable than you think.

What is Life Insurance?

Life Insurance is defined as a contract between the policy holder and the insurance company, where the life insurance company pays a specific sum to the insured individual's family upon his death. The life insurance sum is paid in exchange for a specific amount of premium. Life is beautiful, but also uncertain. Whatever you do, however smart and hard you work, you are never sure what life has in store for you.

It is therefore important that you do not leave anything to chance, especially ‘life insurance’. As death is the only certain thing in life, apart from taxes, it pays to insure it well in advance.

Why you Need a Life Insurance Now?

The significance of having a life insurance is to avail the "peace of mind" that it brings along. However, having an adequate amount of life insurance effectively sets your mind free of some important questions like:

• What will happen to my family financially after I die?

• How will my wife and kids take care of their expenses after I am no more?

• How will I provide for my family in case I lose my job after an accident?

• How do I ensure that I am able to fund my child’s higher education?

• How do I ensure an income after my retirement?

How is it helpful?

Safeguarding your family’s future is a must, particularly if you are the only or primary breadwinner in the household. Life insurance is what keeps your family safe and sound even when you are not around. Life insurance provides a protective financial cover for you and your loved ones. It ensures that you and your dear ones always get financial support.

Top 20+ benefits and advantages of life insurance

Photo Consumer Coverage
Photo Consumer Coverage

1.Life Insurance Payouts Are Tax-Free

If you have a life insurance policy and die while your coverage is in effect, your beneficiaries will receive a lump sum death benefit. Life insurance payouts aren’t considered income for tax purposes, and your beneficiaries don’t have to report the money when they file their tax returns.3

2.Your Dependents Won’t Have to Worry About Living Expenses

Many experts recommend having life insurance that's equal to seven to 10 times your annual income. If you have a policy (or policies) of that size, the people who depend on your income shouldn't have to worry about their living expenses or other major costs. For example, your insurance policy could cover the cost of your children's college education, and they won’t need to take out student loans.

3.Life Insurance Can Cover Final Expenses

The national median cost of a funeral that included a viewing and a burial was $7,640 as of 2019.4 Because many Americans do not have enough savings to cover even a $400 emergency expense, having to pay for a funeral can be a substantial financial burden.5 If you have a life insurance policy, your beneficiaries can use the money to pay for your burial expenses without having to dip into their own savings or use credit.

Some insurers offer final expense policies. These policies have low coverage amounts and relatively inexpensive monthly premiums.

4.You Can Get Coverage for Chronic and Terminal Illnesses

Many life insurance companies offer endorsements, also known as riders, that you can add to your policy to enhance or adjust your coverage. An accelerated benefits rider allows you to access some or all of your death benefit under certain circumstances. Under some policies, for example, if you are diagnosed with a terminal illness and are expected to live less than 12 months, you can use your death benefit while you’re still living to pay for your care or other expenses.

5.Policies Can Supplement Your Retirement Savings

If you purchase a whole, universal, or variable life insurance policy, it can accumulate cash value in addition to providing death benefits. As the cash value builds up over time, you can use it to cover expenses, such as buying a car or making a down payment on a home. You can also tap into it if you need to during your retirement years.

However, a life insurance policy should not replace traditional retirement accounts like a 401(k) or an IRA. What's more, cash value life insurance is considerably more expensive than term life insurance, which has no savings component but simply a death benefit.

What are the advantages of Life Insurance?

1.Financial Security - Having life insurance provides the ultimate peace of mind. This is because if someone were to meet with their demise, they know their family and loved ones will have a financial safety net. All of us have some financial liabilities, but an adequate life insurance cover ensures that your debts or loved ones will be financially taken care of in the event of your death.

2.Wealth Creation - Some life insurance plans also offer you the opportunity to create wealth. Apart from life cover, these policies invest your premium in different investment classes to deliver superior risk-adjusted returns that beat inflation and grow your corpus.

3.Tax Savings - Life insurance plans offer dual tax benefits. The premiums paid offer tax deduction under Section 80C of the Income Tax Act. Separately, the maturity insurance plans may be entirely tax-free. This tax benefit^ is under Section 10(10D) of the Income Tax Act.

4.Save More - Life insurance plans give you the ability to lock in low premium rates while you’re young. If you buy the same policy when you are older, you will be paying a much higher premium compared to if you bought the same plan when you were younger. .

READ MORE: What is Business Insurance: Definition, Types and Cost

Benefits of different kinds of life insurance

Photo Google
Photo Google

There are two basic kinds of life insurance: term and permanent like whole life.

With a term life policy, you pay a specific premium for a defined term (say 10 years). If you die during that time, a death benefit is paid to your beneficiaries – but when the term is over you must get new coverage or go without. A whole life policy is permanent life insurance that last your entire life.

It’s easier than ever to apply for life insurance

Policygenius makes it easy to compare life insurance prices online. In just about 10 minutes, you can get free quotes from many different life insurance companies, and choose the one that fits your needs from there.

You can even complete the entire life insurance application online over a couple of commercial breaks while you’re watching “The Good Place.” You just need your medical and financial records by your side. If you need help, reach out to one of our experts.

We have more financial concerns than we used to

The range of expenses is always growing. At one time, there were fewer: rent/mortgage, council tax, utilities, phone line and TV licence. But now, many of us have contracted payments to TV package providers, broadband providers, mobile phone companies and other subscription services.

That’s before factoring in things like owning a car. While it’s arguable that these are choices rather than obligations, very few of us would be able to live without them.

Naturally, we commit to these purchases because we don’t imagine that we will die. But if the worst should happen, would your loved ones have the advantage of being able to maintain these payments? One of the benefits of life insurance is that it could help your loved ones with these expenses.

Few of us have sufficient savings

The Mintel Report from 2018** found that only 25% of people without life insurance have savings of more than £10,000 and the Mintel Report from 2019*** shows that there are 7% of people with savings of more than £50,000.

In many situations, putting money aside can be very challenging, and the savings one has can quickly get spent on unplanned outgoings – both good and bad.

The benefit of a life insurance policy is that it can mitigate for a lack of savings after you die, even if it is something like over 50s life cover, which has lower premiums than term cover and a predictable pay-out that can help cover the cost of your funeral.


As interesting life insurance facts go, this one definitely ranks among the best pieces of news: Consumers overestimate the cost of life insurance by 300% on average. In reality, a healthy 30-year-old woman can buy a 30-year, $250,000 term life insurance policy from Fidelity Life starting at $27 per month.

More detailed considerations

Many things can cause us to start thinking about our mortality and questioning whether or not we would benefit from buying life insurance, but there are also situations where it will be much more obvious.

Buying a house is one such event. It is likely to be the largest amount of money you will spend in your life, and if you have a repayment mortgage, you want to try to ensure that the people you love could continue to live in their home if you were to die.

If you start a family, you are suddenly confronted with the fact that there is a new person in your life who is utterly dependent on you. Naturally you will want to spend as long as possible with them, but in the event of the unexpected, it will bring you comfort to know that they are provided for.

Photo HSBC
Photo HSBC

How to get more benefits when buying life insurance?

The most cost-effective way to buy life insurance is to do it when you are younger and healthier. Life insurance companies generally give younger customers lower rates for reasons that are easy to understand:

-They tend to have a longer life expectancy

-They are less likely to have been diagnosed with a serious disease

-They are likely to pay premiums over a longer number of years

Not in your twenties anymore? Don’t worry.

There are still a lot of affordable options. But if you want to get the most value out of each premium dollar, it pays to do your homework and figure out exactly what you want from your coverage. Most policies have riders that can add worthwhile benefits for a relatively small added amount. Two of the most popular riders include:

1.Accelerated death benefit: This rider can help pay for needed care of a diagnosed chronic or terminal illness. While this can be very useful in a time of need, you should also know that funds paid out will typically lower the death benefit paid to your family.5

2.Disability waiver of premium: This valuable rider gives you the ability to stop paying premiums if you have a disability while keeping your coverage.6

There are other kinds of riders you should know about as well, so talk to an experienced professional – like a Guardian financial professional – before deciding to purchase one policy or another. You should also find out about other ways to control your policy costs, including:

1.Purchasing a joint policy for you and your spouse

2.Getting insurance at group rates through your employer

3.Purchasing a whole life policy that accumulates cash value, which can be used to reduce monthly premium costs later

Term Life & Whole Life Insurance: Which Is Better? Term Life & Whole Life Insurance: Which Is Better?

Are you considering between term life insurance and while life insurance? This article might give you suggestions to make decision.

Life Insurance: Myths and Facts

Myth 1: Life insurance isn’t important right now because I’m young, single and don’t have any dependents.

Fact: This is one of the biggest misconceptions about life insurance. Some young people don’t believe that life insurance is important because they don’t have any dependents or many assets. But, getting life insurance when you’re young and healthy means you can secure a lower rate on your premium than you may be able to later in life since coverage typically becomes more expensive as you age. Also, when you consider your debts, like school loans, car loans, or credit cards, and final expenses such as funeral costs that would need to be covered in the event of your death, a life insurance policy can help remove the financial burden off your loved ones’ shoulders.

Plus, when you’re young and get a permanent life insurance policy, like American Family’s Whole Life coverage, you can start building cash value, which is a component of a permanent life insurance policy that allows you to borrow* from it later in life to go towards things like a home purchase, college tuition for your kids, retirement income, or even to invest in a business. The younger you start, the earlier you’ll start building that cash value. Check out all the ways cash value of life insurance can benefit you and your loved ones.

Myth 2: It would always be better to put my money in savings instead of towards life insurance.

Fact: Many people find that they can put money into savings as well as life insurance. As noted throughout this article, there are advantages to purchasing life insurance, such as having peace of mind that you have put some financial protection in place for your loved ones, should you pass away. Whether life insurance makes sense for you depends on your financial situation, but your agent can work with you to provide options so that you can decide how life insurance could fit into your budget and your savings goals.

As we mentioned before, there’s also a component of permanent life insurance policies that allows you to build cash value that can be borrowed* against, while also providing a death benefit for your beneficiaries. Read more to learn about the living benefits of life insurance.

Myth 3: Life insurance is too overwhelming! There are too many options...

Fact: Don’t worry! Life insurance doesn’t have to be difficult. There are many resources we provide to help you better understand your options. Your best resource is an American Family Insurance agent — they’ll be able to answer all your questions — or you can check out our life insurance coverages and resource center to help get you up to speed. The more you understand, the better you can protect those who matter most!

*Disclaimer: Any loans taken from your life insurance policy will accrue interest. An outstanding loan balance (loan plus interest) will be deducted from the death benefit at the time of claim. If the loan balance grows too large for the cash value to support it, the policy could terminate.

Life insurance FAQs

Do I need life insurance if I already get it through work?

Group policies provided by employers typically offer an affordable and easy way to enroll in life insurance without a medical exam. However, group policies may only pay an amount equal to one or two years of salary or a similarly limited amount, which may or may not be enough to cover your family’s needs.

Additionally, when you change jobs, you may not be able to take your life insurance coverage with you. When you consider that, the older we get, the more difficult and costly it may be to obtain life insurance, having a personal policy to supplement your employer-provided policy can make sense.

What’s better: A term life policy or a whole life policy?

It really depends on what you want: Both policies provide a death benefit, but whole life policies can provide additional benefits and offer more flexibility than term policies; also, the premiums tend to stay the same for life. Term life policies provide fewer benefits but are also less expensive – and while your premiums remain stable over the term of the policy, once it expires you can expect to pay significantly more for your next policy.

How much life insurance do I need?

There are general rules for determining how much life insurance you need. Typically, people want to provide enough of a death benefit to cover the lost salary and key expenses – like a mortgage – that their family will face, especially while their children are still at home.

How much does life insurance cost?

The cost of life insurance will vary. From a broad perspective, it’s all about risk. The greater your risk of dying, the more you are likely to pay for life insurance. That’s why life insurance is relatively inexpensive to purchase when you are young and healthy. To determine your risk, underwriters look at such things as age, medical history, use of nicotine and alcohol, and any hazardous pastimes, such as skydiving. There are medical conditions that can cause the denial of an application, such as cancer, heart disease or dementia. For most types of coverage, your insurer will likely ask you to take a medical exam.

What you pay for life insurance premiums can also depend on other things such as the type of policy you choose, the coverage amount and the number of years you need to have it in place. If you have riders, or customized provisions, added into your policy, those typically come at an extra cost.

What are the life insurance options for seniors?

It depends on your needs. Life insurance generally gets more expensive with age, so many seniors get policies with just enough coverage to provide for funeral expenses to avoid burdening their family. Life insurance can also be used for estate planning strategies, where it can be a tax-advantaged way to leave assets to heirs.

How can I save money and still get the coverage I want?

Consider buying now. No matter how old you are, you will never be younger than you are today. Age can be a significant factor in determining premiums. Many multi-line insurers offer discounts on either the life policy or the home or auto policy when you “bundle” all your policies with their companies, so ask if the company offers any such cost savings.

How long should my coverage last?

Your life insurance coverage should last as long as your financial obligations and debts. If you don't select a long enough term length, you could end up having to buy more coverage when you're older, and premiums will be significantly more expensive.

What happens if I can’t pay my policy premiums?

Most life insurance policies include a 30- to 31-day grace period after your payment due date (the exact period can vary by insurer or state). If you don’t pay your premium within that period, your policy will lapse and you will need to work with your insurer to reinstate your coverage.

How are death benefits paid?

The way you structure your death benefit will depend on your family and your goals. One option is a lump-sum payout, but you also can generally have the benefit issued in monthly payments. That way your beneficiary will not receive all the benefit at once. You can even structure your life insurance to pay the death benefit into an individual retirement account (IRA), to provide savings for your spouse’s retirement.

What kinds of deaths are not covered by term life insurance?

For the most part, if you pay your premiums regularly and die while your policy is active, your beneficiaries will receive the payout. There are, howeve a few situations where your insurer may not pay out: death by risky hobby (if you didn't inform your insurance company that you regularly go bungee jumping, for example), murder (if your beneficiary murders you, they won't get the death benefit due to the Slayer Rule), suicide (if you die during the suicide clause period, which is the first two years of the policy).

Best Tips To Purchase Health Insurance Best Tips To Purchase Health Insurance

Buying insurance is a significant investment, and you’ll want to invest wisely. Check out this article to know 10 tips to consider before buying health ...

Most Weirdest Insurance Policies Around The World Most Weirdest Insurance Policies Around The World

What are the weirdest insurance policies in the world? Insurance is available even after the escape of aliens, vampire and bride run away in marriage, ...

What Is Mortgage Insurance and How Does It Work? What Is Mortgage Insurance and How Does It Work?

What is mortgage insurance, how it works, and what are its benefits? Scroll down to understand more details about the advantages of mortgage insurance.