Almost one-third of consumers think the sole purpose of life insurance is to pay for funeral and burial expenses.
The truth is . . . it can cover so much more.
What Life Insurance Covers
Essentially, life insurance is designed to leave a loved one with a sum of money after you pass on which can be used to pay a wide range of expenses and more.
If you’re not exactly sure what life insurance can cover, refer to our handy list below which outlines six important benefits.
Pay monthly household bills
In your absence, who would pay the ongoing household expenses if your income suddenly stopped? Having the proceeds from life insurance can stave off financial hardship because they can be used to pay for virtually anything and ensure financial security. Your spouse or loved one can use the money to pay for bills, like groceries, household utilities, car insurance, etc., as well as other unexpected bills that can come up.
Repay outstanding debt
Paying down credit card debt, personal loans you may have co-signed for, as well as a loan you may have taken out to buy a new car, can stretch any budget. But trying to make those payments when you may no longer have a primary wage earner’s paycheck coming in can be even harder. Money received from life insurance can help ensure your loved ones have enough to pay back those loans . . . without stress or worry.
Fund college education expenses
With the average cost of an in-state, public college tuition at $10,388 per year (plus, room and board, meals, and other fees, etc.) you may want to factor in the cost of paying for your child’s college education when you consider life insurance. This way, if you pass on prematurely, the money can still be there for your child to go to college.
Cover dependent care
What if your spouse is left to take care of the kids or an aging parent . . . without your income? If you’re gone, the money received from your life insurance can cover the cost of taking care of the little ones and older ones. In fact, it can help pay for everything from babysitters and nannies to after-school programs and adult daycare services.
Use it for medical expenses and long-term care
Although life insurance is mainly used to support your loved ones, you may be able to leverage it for your own benefit. For example, life insurance policies that provide living benefits can offer an accelerated death benefit rider, which allows access to some of your death benefits during your lifetime. So, in the event you’re diagnosed with a terminal illness or need long-term care, this can help you pay for medical bills . . . and reduce the financial burden your loved ones may be faced to pay once you’re gone.
Just a couple of things to keep in mind about tapping into living benefits that life insurance may offer:
1) Using part of your death benefit early will ultimately cut the amount paid to your beneficiaries.
2) They are not the same as long-term care insurance, which can help protect your financial health from the impact of extensive medical bills.
Leave a legacy
Life insurance can also be used to leave a financial gift to a beneficiary, your children, grandchildren, or a nonprofit organization. Just make sure to purchase an appropriate amount of coverage so that your loved ones receive enough to cover their financial needs as well.