7 Benefits of Life Insurance Many People Overlook

Updated on February 6, 2018

They say that there are only two certainties in life: death and taxes. While it might not be pleasant to think about, preparing for the end of life is essential to ensuring our loved ones are well taken care of when we're gone.

In spite of this, research shows that over one-third of Canadian adults do not have life insurance. Many more Canadians do not have adequate plans for their needs.

If you're one of the many Canadians without it, you may be wondering what the benefits of life insurance are. Is it really necessary for someone young and healthy?

How much insurance do you need to have?

We've got the answers for you here. Let's take a closer look at 7 benefits of life insurance that folks often fail to consider.

Tax Benefits

One of the greatest benefits of life insurance is the tax advantage. If you leave cash or other assets to your family members, they may be taxed on that inheritance.

In most cases, however, beneficiaries do not need to pay any taxes on earnings from a life insurance policy.

Get Cash if You Need It

Many people do not realize that the benefits of life insurance are not just for their family who they will leave behind. Many life insurance policies actually have options that allow the policyholder to take advantage of the money they have paid for it.

With your car insurance or your homeowner's insurance, you can only take advantage of the premiums you have already paid if you make a claim. With a life insurance policy, however, you often have the option to take out a cash value withdrawal.

The cash value of your insurance policy also grows tax-free. For this reason, some individuals look at life insurance as a unique investment option.

Cover Final Costs

Estimates indicate that the average funeral costs about $7,000 to $10,000--about the cost of a small wedding. The last thing you want to do is leave your grieving family with a financial burden. Life insurance can be used to cover these costs.

But funerals are not the only end of life costs that life insurance covers. For instance, many policies allow holders to use life insurance to cover medical costs that are not covered by insurance. This can help offset the costs of your long-term care for your family.

Additionally, life insurance can help cover estate planning costs. In some cases, a life insurance policy may even be able to pay off the remaining balance on your mortgage so that your spouse or children will not be left with it.

Cover Income

The costs of healthcare and funeral expenses aren't the only issues that face family members when a loved one passes. For instance, if the person who passes is the primary provider for the family, it can be extremely difficult to adjust to expenses without their income.

This is especially true if the person passes unexpectedly.

With some life insurance policies, you will be able to arrange for your income to be replaced if you pass away. Your family can use this to pay monthly bills or can put it away for savings, such as a college fund.

Pay off Debts

When a person passes away, they do not need to worry any longer about their student loan, credit card, or other debts. The same is not necessarily true for their family. While some debts may be able to be forgiven, others will still need to be paid.

Life insurance can be used to ensure these debts are paid off, rather than passed on to your spouse or children.

Lock in Insurance Young

One of the big mistakes folks make when it comes to life insurance is waiting too long to get it.

The older you are, the bigger liability you present to a life insurance company. This means higher premiums.In other cases, you may develop health problems that lead insurance companies to refuse to cover you or to charge prohibitively high premiums.

If, however, you first purchase life insurance when you are young and healthy, you are essentially ensuring for your future insurability. This is because any health problems that present will not be seen as preexisting conditions, and won't be a reason to deny coverage.

Giving for a Good Cause

What if your spouse and children are already well provided for? Are there any benefits to having life insurance in this case?

One key benefit is the option to designate a charitable cause or organization as the beneficiary of your policy. This way, the organization can receive these funds tax-free.

This can be a great legacy to leave, especially if it is an organization that you are passionate about.

Are There Any Disadvantages to Life Insurance?

Of course, it is always advantageous to consider both sides of an issue. So, are there any notable disadvantages to taking out a life insurance policy, particularly at a young age?

The main drawback comes when considering what you would do if with your monthly premiums if you weren't spending them on insurance.

For instance, you may wonder if you could make more money investing this amount, rather than spending it on insurance. Or, you may prefer to have access to liquid assets.

Ultimately, that decision is up to you. Keep in mind, however, that if you take out a life insurance policy when you are young and healthy, you are likely to have lower premiums. Waiting can cost you more money in the long run, even with investments.

To help you decide what's best for you, you can get a free quote on insurance policies to see what kind of monthly payment you can afford.