Buying life insurance may not be an easy decision to make. Planning in case of one’s own death is not a pleasant subject. However, it is a crucial step to protect your loved ones and plan for your financial future. The better you understand it, the more informed your decision will be when you purchase a policy. The following are five myths debunked about life insurance.
A Stay-at-Home Parent Who Does Not Earn an Income Does Not Need Life Insurance
If you are a stay-at-home caregiver and don’t earn a salary, you may think you don’t need life insurance. This couldn’t be further from the truth. The value of your services in caring for children or aging parents and running a household is considerable. Your partner would need to hire help or take time away from work to replace those services. Life insurance can help cover those expenses if something should happen to you.
Beneficiaries of a Life Insurance Policy Must Pay Income Tax on the Proceeds
Life insurance benefits are generally not subject to income tax. Beneficiaries are not required to report the proceeds on their tax returns. Although your beneficiaries will not pay income tax on the death benefits they receive from your life insurance policy, interest paid on the proceeds may be taxable.
You Don’t Need Life Insurance Once the Children are Grown
Life insurance can be an important asset at various stages of life. Once your children have reached adulthood and completed their education, a life insurance policy can still provide advantages. For example, it can relieve the burden of paying for final expenses, estate taxes, or any remaining debts you may leave behind. Life insurance also provides a way to leave your children a non-taxable inheritance that does not have to go through probate.