Life Insurance – Advantages and Disadvantages

Life insurance provides protection against the risk of financial loss and income to the beneficiary. Life insurance is offered by insurers in a broad range of insurance products. The products carry payment methods and maturity options along with other facilities based upon choice of the policyholder.

Life insurance offers certain advantages which are not offered by any other financial instruments. Likewise, it carries certain disadvantages as well. In this article, we will discuss the both advantages and disadvantages with life insurance policies.

Advantages

  • Life insurance is flexible as per the policyholders’ needs.
  • The dependent beneficiaries of the policyholder will get money when the insured person death, it will be helpful to them financially.
  • Premiums may be easily skipped or increased or decreased.
  • No need to wait for save up this amount of money.
  • Generally life insurance have an exemption from income tax.
  • Policyholders can choose their own beneficiaries.
  • There are number so many policies available to choose the correct one.
  • The beneficiaries are income tax free from death benefits.
  • If the policy owned properly, death benefits are estate tax free.
  • In life insurance cash withdraws are first in first out basis. So cash withdraws up to total premium are income tax free.
  • Loans taken on policies are income tax free.
  • The life insurance policies may be exchange for other life insurance policies or for premium.
  • The exchange of life insurance policy does not incur the current taxation.

Disadvantages

  • When the policy is not properly met the taxation conditions it should be taxable.
  • Having much policies will lead to effect on current income.
  • With poor health the life insurance companies does not accept to sell a policy to the requested person.
  • When there is any delay in paying annuity the companies will charge extra penalty.
  • Cash paid by the company to the policyholder when opted for discontinue is less than they paid for the first few years.
  • When the policy owner wants to discontinue in very initial years he/she may not get any money from the company.
  • When the income of the person is not stable and having fluctuations, It will be difficult to pay the annuity.

Because of guaranteed income and other flexibility to investments through life insurance, some people are interested doing as life insurance as an investment option. There are many companies providing their unique features for each policy type. So ultimately the decision is always in the hands of the person who wants to insure his/her life.

The most important thing about life insurance is it covers life risk, unlike other saving in channels. Therefore, make sure to you properly plan your insurance purchasing, and pay the premium, timely and make decision correctly in respect of buying more insurance, etc. Purchasing a life insurance package for yourself and family is a sensible decision.

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