Life insurance’s most obvious and significant benefit is the lump sum payment it provides when the insured person dies. This lump sum is paid directly to the beneficiary designated in the life insurance policy and it’s not taxable.
The specific need this lump sum payment addresses will vary with your needs, which could include protection for surviving dependants, estate preservation or creation and funding to ensure that an estate is distributed equitably.
The most common use of life insurance is to protect a person’s dependants. If that person dies, his or her dependants could have to deal not only with the loss of a loved one, but also the loss of that person’s present and future income.
The tax-free, lump sum payment a life insurance policy provides can replace the deceased person’s earnings, pay debts and other liabilities, and cover education costs and daily living expenses.
Another use of life insurance proceeds is to pay debts, tax liabilities and other estate costs so the estate’s assets don’t have to be eroded or borrowed against to cover these expenses.
Exciting times are ahead as you start the search for your dream home! You’ll spend the next while analyzing your family’s housing needs, calculating how much real estate you can afford and shopping for the best mortgage rate. While you’re working on the to-do list, take some time to consider the type of mortgage insurance product that best meets your family’s needs.
To start, the mortgage insurance your lender will try and sell you may not be the ideal solution. Insurance should be designed to support your loved ones. However, unless you consider your bank a “loved one,” you might want to consider another option.
An individually-owned term insurance plan, like Manulife’s Family Term, offers you better guarantees and greater choice of coverage options, regardless of your mortgage balance.
Best of all, you can designate your loved ones as beneficiaries under the policy. This means the insurance benefits go directly to them upon your death, and they decide how best to use the money.