Reader Question

When I die and my life insurance policy pays out to my family…how will that be taxed?

Jenny,

Canyon Lake, Texas

I found this excerpt about your question Note: Under the current federal law, beginning in 2011, estates over $1 million will be subject to the federal estate tax with a maximum tax rate of 55 percent. Note there is a deduction against income for estate taxes paid. A good estimate of the net total percentage paid in taxes at the top brackets is 70%.

Reader Question

Should I consider my life insurance policy an investment option like the stock market?

Cherry,

San Antonio Texas

Hi there Cheryy, I would consider investments in the stock market are not a substitute for life insurance. Many Certified Financial Planner professionals recommend making sure adequate life insurance is in place before starting an investment program-even if it means paying the premiums with money that otherwise would have been invested. Although investing is essential to making money grow over time.

Reader Question: How are benefits graded in my life insurance policy?

Sal,
San Antonio Texas

Hi Sal, Generally life insurance benefits are graded during the early years of the policy for death from natural causes, with the full amount paid if death occurs after the graded period or if the policy-holder dies accidentally at any time. Benefits may be used to cover burial expenses. A policy is usually purchased to cover up to a certain amount of years.

Do you really NEED life insurance, what does it cover, and how much do you really need?

Life insurance is a way to help secure a family’s financial situation if the unthinkable happens. And though it may seem daunting, determining how much of a life insurance benefit is appropriate is relatively easy. Life insurance is usually not a particularly popular subject to discuss. Images of pushy salesmen waving the policy that “you absolutely must have” instantly come into your mind. Life insurance is one of those things that everyone should have, but a lot of people do not. Many of the people who have life insurance, do not have enough.

Life insurance is intended to provide some level of protection for financially interested parties should the worst happen. This means that cover can be provided for others who will become financially disadvantaged by the death of the insured person. Life insurance is unique among financial instruments. It is one of, if not the only financial instrument that is based on caring and love.

Term life insurance is pure insurance. When you purchase a term policy, you are buying coverage for a specific period of time. Term life insurance will almost always cost you less than whole life insurance. Term insurance is purchased for a specific period of time, for a specific face value. Term insurance (often called “pure insurance”) is a type of life insurance. It only covers you in a predetermined length of time, like five or ten years.