Life insurance provides a financial safety net for your family in the event of your death. There is no federal income tax on the payout of life insurance policies, ensuring your family receives its benefits in full.
The first step in choosing the best plan for your needs is to make a list of all of your family's financial responsibilities. From there you can estimate the amount of money your family would need to satisfy financial obligations and make a lifestyle transition after your death. An insurance agent can help you choose the type of insurance policy that best fits your needs. Here are examples of standard coverage options:
- Term insurance is coverage for a specific period of time
- Permanent insurance covers the insured for an entire lifetime
While a term insurance policy can be renewed after expiration, its premium will rise accordingly. Permanent insurance is not a progressive type of policy, meaning you won't have to pay more as you get older.
Common permanent life insurance plans have a "cash value" option that offers the insured a number of choices. For instance, if you cancel your insurance coverage, the cash value option will pay out the lump sum of the premium.
It's also possible to "borrow" against a life insurance plan (based on the total amount of the cash value) and use it as collateral. The "loan" will still require interest and, if not paid back in full, can reduce the amount of death benefit your family would ultimately receive in the event of your death. A permanent life insurance policy allows you to add additional insurance, or "riders," to help specifically tailor your coverage to meet your needs. For more information, visit the following websites:
Insurance Information Institute offers clear and basic definitions for insurance coverage types.
The Nevada Division of Insurance details current information on insurance guidelines and restrictions for the state and provides updated news on legislation pertaining to the insurance industry.