3 Surprising Facts About Life Insurance Services

Life is full of the unexpected. You never know what the next day holds. While it may be unpleasant to consider, any day could be your last. If this were the case, would your loved ones be taken care of? These are the questions that we need to ask ourselves, and it's why we need to be prepared. To be financially prepared for an untimely death, many people purchase life insurance services to protect their loved ones. According to LIMRA's 2020 Insurance Barometer Study, 54% of Americans had life insurance coverage in 2020. Although these policies are widespread, not everyone knows about their specifics. Here are three life insurance details that may surprise you.

1. Death Benefits are Tax-Free

Death benefits comprise the sum of money that is paid to a beneficiary upon the death of the life insurance holder. Typically, beneficiaries do not have to pay taxes on these death benefits. There are only a few exceptions. For instance, beneficiaries may have to pay tax on the interest that is awarded to them if a policy isn't paid immediately.

2. A Named Beneficiary Can Surpass a Will

Life insurance services always specify a beneficiary to receive the death benefit. However, this beneficiary does not always match up with the beneficiary specified in the will. Regardless of the will, if a policyholder designates a beneficiary, that person typically receives the death benefit. For instance, if a person's will specifies that their spouse should receive all of their assets, but they appointed their cousin as the beneficiary of their life insurance policy before getting married, the cousin would receive the death benefit regardless of what the will specifies.

Even so, there are some exceptions to this issue. For example, various states have revocation-upon-divorce statutes that take effect if a policyholder forgets to modify their beneficiary after the marriage ends. However, in most cases, the money will go to the designated beneficiary as described by the life insurance policy. This is why it's crucial to renew life insurance plans as circumstances change over time.

3. Sometimes Death Benefits are Paid While the Insured is Still Alive

Many people believe that life insurance policies are paid after death. This is normally the case, but occasionally a policy could award the money while the policyholder is still living if they have an expedited benefit rider. If the insured person develops a terminal illness, this generally enables life insurance money to be paid out early. This kind of rider can assist in making sure money is available to cover high-cost medical expenses or offer support when a significant sickness renders employment impossible.

These three surprising facts provide some insight into the usefulness of a life insurance policy. Family is important and life insurance services are useful for ensuring that your loved ones are taken care of in the future. Contact Pivar Financial Group today to learn more about our life insurance services.