Life Insurance: Purpose Explained
A life insurance policy will give you peace of mind knowing that your loved ones will have the financial resources to cover your final expenses if something happens to you.
When you purchase a life insurance policy, the death benefit is paid tax-free to your beneficiaries.
This can be used to cover expenses like funeral costs, pay off debts, or provide for the needs of your loved ones. Having a life insurance policy in place can give your loved ones the financial security they need in the event of your death. While the death benefit from a life insurance policy is not subject to taxation, the policy’s cash value is. This means that if you withdraw money from the policy’s cash value, you will be required to pay taxes on the amount withdrawn. The cash value of a life insurance policy can be accessed through a loan or withdrawal. Withdrawals will reduce the policy’s death benefit, while loans will need to be repaid with interest. It is important to remember that if you are taking out a loan against your life insurance policy, the loan will need to be repaid with interest. If the loan is not repaid, the death benefit will be reduced by the outstanding balance of the loan.
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