When you think about life insurance, what comes to mind?
Do you think about the financial security it provides the family in the event of a person’s demise? Or how it can help pay for end-of-life expenses? Life insurance has several uses that go beyond simply providing financial support to your loved ones.
In this article, we’re going to take a detailed look at what a life insurance policy covers.
Monthly Bills and Expenses
One of the most common applications for life insurance is to provide a source of alternate income for dependents. After receiving the death benefit, the beneficiary can use the funds to pay bills, such as groceries, utilities, and childcare, as well as any other expenses that may arise. There are no restrictions on expenses that a death benefit payment can cover.
Co-Signed Debts
Debt repayment costs can be difficult on anyone’s budget, but paying off debts on which you co-signed after losing financial support from a loved one can be even more difficult. Mortgage payments, car loan payments, and other debts can strain finances. Receiving a death benefit can relieve your loved ones of the burden of covering these expenses.
Education and College Tuition
If you are financially responsible for your child’s college tuition or education, consider including those costs when purchasing a life insurance policy. Including the cost of college in your life insurance calculations could significantly increase the death benefit amount required. Because life insurance beneficiaries are free to spend their payouts however they see fit, factoring college costs into your death benefit amount could provide significant support after you’re gone.
End-Of-Life Expenses
Another important purpose of life insurance is to cover end-of-life expenses. The death benefit of any life insurance policy can be used to cover funeral expenses. In such situations, one can consider final expense insurance. This permanent life insurance provides a small death benefit and is usually approved without a medical exam.
Child Care or Dependent Care
Daycare and after-school programs, as well as nannies and other expenses, can all be covered by life insurance policies. If your beneficiary is also caring for an aging parent or another dependent, a life insurance death benefit may also help with those expenses.
Long-Term Care and Medical Costs
While the primary purpose of life insurance is to provide financial support for your loved ones, you can sometimes use your policy to your advantage. If your policy has living benefits, you can choose how to use it while you’re still alive. Depending on your needs, you can select from various living benefits.
While this is incredibly beneficial, using a portion of the death benefit early reduces the total amount paid to the beneficiaries at the time of need.
Estate Planning
Life insurance can cover the costs of estate planning after death and funeral costs. Estate planning entails hiring an attorney to close any remaining accounts and officially reporting the death to the county and the IRS. Many people are unaware that their descendants may still owe taxes to the IRS, and a life insurance policy can assist them in covering these costs so that they are not burdened financially.
