Taking life insurance is one of the priorities for someone who has dependants. Life insurance is a contract between the insurer and the insured to pay a specified beneficiary a sum of money upon the death of the insured. During the period of the contract until the insurer death, the insured will be paying a specified premium. Since the benefits of this contract are to go to a beneficiary, it means that people who don’t have dependants will be incurring unnecessary expenses by signing up for this insurance. There are many benefits that accrue from signing up for life insurance and they are as follows.
One of the important benefits of life insurance is that it helps the dependants to adjust to the loss of the insured. In most cases you will find that the person who has taken the life insurance is the main bread winner for the family and his/ her demise leaves the family in a vulnerable position. The money may not be sufficient to sustain the standard of life the dependants were accustomed to but it will provide a temporarily relief as the dependants seek alternative sources of income.
Depending with the life insurance contract the insured has signed, money may be availed to the insured in case of critical illness or terminal illness which will help the insured to recover or cope with the illness. You can consult Your Personal Financial Mentor for more details on these contracts. Upon the death of the insured, funds from the insurance can be used to clear outstanding medical bills and also cater for funeral experience. With this in place, the grieving family is able to grieve in peace.
Funds paid out after the demise of the insured can be used to fund projects that the deceased was passionate about. This could be educating the dependants, building a home for them or starting an income generating activity to sustain the dependants. This ensures that the deceased dreams and aspiration are met.
Life insurance benefits can help the dependants to pay for debts and tax obligation left by the deceased. Currently most loan obligation from financial institution come together with an insurance cover that caters for the loan incase the debtor dies. So for this kind of debt there is no risk of having to raise money to pay the debt. On the other hand taxes are a different issue. Taxes to be paid are inheritance tax and property tax. If there is no extra cash to cater for these expenses, the taxes will eat into the deceased estate since property has to be sold to cover for this.
More information about life insurance and its work you can find from this video: