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Keeping our loved ones protected is something we all strive to do. If the unexpected happens, a life insurance policy provides cash for those that depend on you financially.
This cash, known as the death benefit, replaces your income and can help your family meet many important financial needs like daily living expenses, college funding and funeral costs. Furthermore, there is generally no federal income tax on life insurance benefits.
To help you understand how life insurance might apply to your particular situation, we’ve outlined some different scenarios below.
Many people mistakenly believe that they don’t need to think about life insurance until they have children. This is not the case. If one of you unexpectedly passes away, the surviving spouse’s income may not be enough to pay off debts like credit card balances and car loans, let alone cover the monthly mortgage or rent and utility bills. If you’re planning to have children, you’ll want to buy life insurance now instead of waiting until pregnancy—you’ll have plenty of other tasks to complete during this time.
Most families depend on two incomes to make ends meet. If you died suddenly, could your family continue to meet all their financial obligations—from paying the mortgage or rent to daily living expenses? Could your family maintain their standard of living on your spouse’s income alone? Would their plans for the future—like college—stay intact? Life insurance makes sure that your plans for the future don’t die when you do.
As a single parent, you’re the caregiver, breadwinner, cook, chauffeur and so much more. Nearly four in 10 single parents have no life insurance, and many with coverage say they need more than they have. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children’s financial future.
Just because you don’t earn a salary doesn’t mean you don’t make a financial contribution to your family. Childcare, transportation, cleaning cooking, and other household activities are all important tasks, the replacement value of which is often severely underestimated. With life insurance, your family can afford to make the choice that best preserves their quality of life.
Just because your kids are through college and the mortgage is paid off doesn’t necessarily mean that you no longer need life insurance. If you died today, your spouse would still be faced with daily living expenses. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you’ve worked so hard to achieve now and into retirement?
Depending on the size of your estate, your heirs could be hit with an estate-tax payment of up to 45% after you die. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of these taxes, funeral costs and other debts without having to hastily liquidate other assets, often at a fraction of their actual value. Life insurance proceeds are also generally income tax-free and won’t add to your estate tax liability, if properly structured.
Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners or a key employee died tomorrow? Life insurance can help in some ways. For instance, a life insurance policy can be structured to fund a buy-sell agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the proceeds. To protect a business in case of the death of a key employee, key person insurance, payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.
Many single people think they don’t need life insurance because no one depends on them financially; however, there are exceptions. For instance, some single people provide financial support for aging parents or a sibling with special needs. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you’re single. If you’re young, healthy, and have a good family health history, your insurability is at its peak, and you’ll be rewarded with the best rates on life insurance.
Would you like more information on the Life Insurance options available to you? Click here to fill out a quick form and one our licensed Life Insurance specialists will quickly be in touch to discuss your specific needs.