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Life insurance can be an estate planning tool, an investment vehicle, or simply a way to replace lost income in case of unexpected death. Some people purchase life insurance to establish an inheritance for their children or as a strategy to donate to a favorite charity.
Unlike other types of insurance coverage, there are no restrictions on how death benefits can be used. Life insurance beneficiaries are free to use the money as they see fit. Many people invest in life insurance to replace the income they provide for their families, so their financial needs are met, including:
If you have a permanent life insurance policy that builds cash value, you may be able to use it to cover expenses while you are still alive. For example, you could borrow against it to cover the down payment on a home or your child’s college tuition. Borrowing against the cash value could reduce the amount of the death benefit.
Although life insurance covers most causes of death, certain circumstances can prevent beneficiaries from receiving death benefits. The two most common reasons why life insurance claims are denied are:
Most life insurance policies include a suicide clause, which voids coverage if the policyholder dies by suicide within a specified time after purchasing the policy. Insures are likely to deny a claim for death by homicide if the beneficiary was involved in or responsible for the policyholder’s death. Some companies would deny a life insurance claim if the policyholder died while engaging in a high-risk activity such as sky diving.
The best type of life insurance for you will depend on your financial situation, your reason for buying a policy, and your investment goals. The basic types of life insurance are:
If you are considering life insurance, contact our knowledgeable agents. We can get you the best quote for the coverage you need.
Filed Under: Life Insurance | Tagged With: Life Insurance