4 Surprising Facts About Life Insurance You Probably Didn’t Know
March 21, 2023
There are plenty of facts about life insurance that people are unaware of, and there is more to unpack. Although life insurance is a valuable resource, people often misunderstand it. With so many details and unique elements to some policies, the lesser-known information about their coverage surprises many people. If you are in the market for life coverage, it is essential to consider the facts.
Fun Facts About Life Insurance
Here are four surprising facts you may need to learn about life policies.
Beneficiaries Typically Owe No Taxes on Life Insurance Death Benefits
Death benefits do not count as income; many people are unaware of that. As a result, beneficiaries owe no income taxes on that amount. It is crucial since tax liabilities on larger insurance policies could be substantial otherwise. It is among the most surprising life insurance facts for many who assume these policy benefits are taxable.
There are some exceptions in cases where a death benefit transfers to someone else or there are interest earnings on the benefit amount, but the policy payout generally is tax-free.
Some Policies Gain Cash Value
If you choose a lifetime life insurance policy, you can draw cash from it later. Whole-life and universal policies usually include a cash value component you can borrow against or draw from when necessary.
Many policyholders use that cash value to pay the policy premiums over the life of the coverage. You may find that borrowing against the cash value of a whole-life or universal policy could reduce the death benefit by that amount unless you pay it back. Make sure you understand the terms before drawing money from this policy.
You May Not Need a Medical Exam
Specific policies, including simplified issue coverage have no medical exam requirements for underwriting. Instead, you only have to answer a series of questions about your medical history. It benefits those that may have a pre-existing condition.
You Might Already Have Life Insurance
Many people have life coverage without even realizing it. Many employers provide life policies for their employees, even if it is only a small death benefit to cover funeral costs. In most cases, the death benefit is only a couple of times your annual salary, so you will typically need additional coverage to meet your family’s needs, but this often is enough for your final services. Check your company’s benefits package or ask your human resources manager to see if your company provides an employee policy like this.
Life Insurance Is a Valuable Investment
Many people need to pay more attention to the value of life coverage. When you want the peace of mind that your family is financially secure following your death, the right insurance policy makes a big difference. Understanding these points can help you appreciate the value of this coverage and choose the right life insurance for your family.
About 1891 Financial Life
At 1891 Financial Life we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.