November 2, 2014 - 9:50pm
Life insurance offers more than a few benefits not available from any other financial instrument; however it has drawbacks as well.
AXIS Capital is a group of global insurer and reinsurer, providing clients and distribution partners with a broad range of specialized risk transfer products and services, i.e. health insurance. We serve a host of industries and diverse coverage needs through our operating subsidiaries and branch offices in Bermuda, Australia, Canada, Europe, Latin America, Singapore and the United States. The company also service SE Asian countries such as Jakarta Indonesia, KL Malaysia and many more.
Benefits of Life Insurance
• Life insurance provides an infusion of cash for dealing with the unfavorable financial effects of the insured's death.
• Life insurance benefit from positive tax treatment not like any other financial instrument.
• Death benefits are in general income-tax-free to the recipient.
• Death benefits could be estate-tax free if the policy is owned accurately.
• Cash values grow tax deferred throughout the insured's lifetime.
• Cash value withdrawals are handled on a first-in-first-out (FIFO) basis, consequently cash value withdrawals up to the total premiums paid are in general income-tax free.
• Policy loans are income tax free.
• A life insurance policy may be swapped for a different life insurance policy (or for an annuity) minus incurring current taxation.
What have been said above are true in general; on the other hand the tax benefits of life insurance have specified limits which under the mistaken set of situations can trigger off the tax benefits cited to be gone. It is advised to discuss with your insurance and tax advisor.
• Numerous life insurance policies are very compliant in terms of regulating to the policyholder’s needs. The death benefit may be reduced at any time and the payments may be simply abridged, avoided or improved.
• A cash value life insurance policy may be supposed of as a tax-favored source of easily accessible funds if the demand occurs; however, the assets supporting these funds are usually thought in longer-term investments, thus making a higher return.
Drawbacks of Life Insurance
• Policyholders decline some present expenditure to pay policy premiums. Furthermore, life insurance is usually bought for the benefit of others and generally just indirectly for the insured person.
• Cash surrender values are generally less than the premiums paid in the first many policy years and occasionally a policy owner may not recuperate the premiums paid if the policy is yielded.
• The life insurance acquisition decision and the placing of the life insurance can be multifaceted particularly if the insurance is for estate planning, business circumstances or complex family conditions.
• The life insurance purchasing process can be maddening and confusing.
• There could be a lot of scams and frauds in this business.