September is Life Insurance Awareness Month and while we push onward through this pandemic, the year has left many families without loved ones; loved ones who may or may not have prepared a financial back-up plan including life insurance to protect themselves and their family. Read more to find out which plans can provide tax-free cash flow for you and your loved ones when times are uncertain.
According to a study by LIMRA in 2020, before the pandemic 1 in 3 families said they would fall upon financial hardship within a month of the primary wage earner passing away. Currently, only 46% of U.S. adult consumers own life insurance and unfortunately ownership has decreased in the past year which probes the question of why, especially in light of the pandemic? Life insurance benefits not only cover funeral expenses; we’re talking tax-free money in a lump sum to assist in paying bills, mortgages, college tuition, weddings, and perhaps most importantly, protecting your spouses’ retirement plan. Two ways to allow for all these benefits to remain tax-free is to not leave the policy beneficiary to an estate and second, arrange to receive the benefit as soon as possible to avoid paying taxes on any interest gained before receiving the benefit.
A study by LIMRA shows 40% of people who own life insurance wish they had purchased policies sooner. When applying for life insurance two questions arise…which plan to choose and how much are the premiums. Like all scenarios, there are several options available both in coverage and cost. Two of the more common choices of coverage are term life insurance and whole life insurance. Term life refers to temporary protection that provides payable benefits only when the insured passes away, during the active policy time period. Term policies do not accumulate cash and will terminate if the policy owner discontinues premium payments or at the end of the term. Term life typically does not last the duration of the insured’s lifetime, however it is a useful and inexpensive way to provide coverage during the income producing years.
If you are looking for a policy that you can “set and forget” while of course still making the premium payments, look at whole life insurance. Whole life insurance is permanent protection that provides strong guaranteed cash value. Paid premiums minus policy charges accrue into cash value. If needed, cash value can be taken as a loan from the policy. Whichever type of insurance you choose it is important to remember that the younger and healthier you are, the more likely you will be approved and receive the lowest premium. Finding the right life insurance policy can ultimately allow your family to properly grieve with peace of mind knowing they will receive a tax-free lump sum to care for them after you are gone.
Contact Us Today!
Cowen Tax Advisory Group specializes in retirement simplified. Life insurance is one component of a solid retirement plan, if you care about your loved ones. September is Life Insurance Awareness Month, contact our office in West Hartford, CT today to schedule a no-cost, no-obligation appointment to discuss the best way to provide future tax-free cash flow for you and your family. Call our office 860-676-1100 or Email CowenTaxGroup@gmail.com to review your life insurance options.
