It’s never too late to get a life insurance policy in Florida.
But the best time to think about it is now!
As a form of personal insurance, life insurance provides benefits to your survivors based on the details of your policy and how long you held it. Benefits can generally be used for any purpose your heirs and assigns choose. Funds may go to a partner, child, or other of your choosing.
While it is true that life insurance is less expensive at a younger age, you can build equity within this kind of insurance policy at any time in life. These funds can be instrumental in ensuring peace of mind for those left behind, especially if you pass away unexpectedly.
The Benefits of Life Insurance in Central Florida
There are two common situations where life insurance benefits may be used:
1. Borrowing Against Your Life Insurance
Some life insurance policies allow you to borrow against the benefit amount you have built up after you pay your monthly premium for a number of years. It’s most common to see this become available after ten or more years. However, some insurers may allow for emergency withdrawals earlier than that.
You can only borrow against permanent or “whole life” life insurance policies, those that are designed to continue as long as you pay the required premiums. This differs from “term life insurance,” which is only in force during a specified period of time (the “term.”)
As you pay life insurance, you accrue cash value, which is managed by the life insurance company and acts as a sort of savings account. The insurer retains control of the money so as to make certain that only the appropriate beneficiaries will have access to it when the time comes.
You can borrow against your accumulated cash value, generally in a tax-free way.
There are some significant benefits to this approach:
- Your credit will not be affected and you do not need to do a credit check
- You do not need to provide any explanation of how the funds will be used
- The IRS does not recognize the loan as income, so it is usually free of taxes
Even though you are borrowing from yourself, however, you are still taking out a loan. That is, you will be expected to pay yourself back with interest. Luckily, these interest rates are usually very low. And as no cash actually leaves your account, it can continue growing as normal.
That said, interest will continue to accrue to the balance of your loan and may, in some cases, even exceed the cash value of the policy. If the loan becomes greater than the policy’s cash value at any point, then the policy may lapse and become invalid.
To avoid this situation, it’s crucial to work with your life insurance company and develop a plan to meet your needs. That includes not only accessing the funds you require but ensuring you are able to pay the total loan back in a way that doesn’t compromise your long-term financial plans.
2. Disbursement of Life Insurance to Heirs and Assigns
Many people will never borrow against their life insurance policy, but that doesn’t mean they don’t get benefits from the policy while they are alive. The peace of mind in knowing that your loved ones will be taken care of when you are gone can be worth more than the price of your premiums!
When the cash value of your policy is provided to beneficiaries, it is known as a death benefit.
Once the policy has been paid out, it comes to an end. The insurance company does not have any say over how funds are used once they have been distributed to their rightful owner. Funds can usually be paid out in a matter of days upon the furnishing of an authenticated death certificate.
In most cases, the funds in a life insurance policy will be used to pay for the decedent’s final expenses. Additional funds can be applied to helping family and other loved ones move forward with their lives, such as through retraining to help a spouse’s career prospects after the loss of a loved one’s income.
Under some circumstances, life insurance proceeds can even be passed down free of income tax, estate tax, and gift tax. To be sure, you will need to work with an expert in estate planning. And before you can take that step, you need a life insurance policy you can rely on.
Choice Health Insurance Brokers is here to help.
Contact us today to learn more.