Most people don’t spend a lot of time thinking about what will happen when they’re gone. However, thinking about life insurance isn’t morbid. This hypothetical question can help ensure the safety and happiness of your family in the event of the unexpected. To learn more about this essential topic, consider these frequently asked questions.

What to Know About Life Insurance

What is term life insurance?

A term life insurance policy will take effect for a set amount of time and for a certain amount of money. If you pass away during that period, the provider will compensate your beneficiaries—usually your immediate family—with the predetermined figure.

What is permanent life insurance?

Permanent life insurance will remain valid for the rest of your life, regardless of when you pass. However, instead of a set amount, your beneficiaries will receive a sum that accumulates over time, so the actual payout could vary based on when you pass and how many premium payments you’ve made.

How much coverage should I purchase?

While it can be hard to tell exactly how much your family will need to maintain their lifestyle because of factors like economic changes and inflation, you can come to a rough estimate. Add up all the funds you currently provide for your family, including salary, benefits, and 401(k). Then think about the services you provide as well, such as cooking, housework, cleaning, and child care. Finally, deduct the money you spend solely on yourself each year, such as work lunches, clothes, and entertainment.

Are there any tax advantages?

Even though your beneficiaries will receive a set amount after your passing, you might be worried that taxes will diminish the gift. However, most death benefits are income tax-free. If you secured a permanent life insurance policy, the accumulating sum will be “income tax-deferred.” Essentially, this means that you won’t have to pay income taxes on the sum while the policy is valid.

If you’re interested in securing an insurance policy, turn to Christina Mendoza & Associates LLC Insurance and Financial Services. This licensed insurance agent serves Bexar County, TX, and the surrounding areas and provides a wide range of coverage types, from health to life insurance. She also offers financial planning services that can help you prepare for retirement. To get started planning for the future, call (210) 389-5289. For more information on her work, visit the website.