3 Benefits of a Properly Designed Life Insurance Policy

    September 6, 2018

    Buying life insurance ensures there is sufficient cash to help your surviving family members pay their monthly bills.

    There are other advantages of buying life insurance too.  However, you should consult an expert in finances. See what she has to say about what a properly designed life insurance policy.

    Having advice from a full-service financial firm can be so comforting as you know you’re on he right track with planning financially for the future.

    Buying Life Insurance – Creating Wealth the Right Way

    A full service financial firm offers a wide range of services so that their clients – individuals and business owners – can achieve their financial goals. Mike Mitchell has been in the insurance business for more than 23 years and has a huge amount of experience on how to successfully plan life insurance that works well for you.

    He shares 3 benefits of a properly designed life insurance policy –

    1) Tax-Free Death Benefit.

    Apart from the cash that builds up, there is also the death benefit tax-free to your heirs. In South Africa one pays death benefits from retirement funds in terms of the Second Schedule of the Income Tax Act.

    Most employers provide for a death benefit, a lump sum to employees but the way in which the benefit is Buying Life Insurancestructured, determines how tax is worked out with it. Most times employers include the premiums in respect of death benefits in the contributions to the retirement fund. SARS then approves it for tax deduction purposes.

    If the person passes away while still working, the deceased’s dependants receive the death benefit according to the Trustees, through the retirement fund. As it comes from the retirement fund, you pay tax on it as it forms part of the retirement benefit.

    To avoid a tax liability like this, an employer can provide death benefits through an insurer, by paying the premiums to a separate group life assurance policy as opposed to the retirement fund. It is then not recognised as a retirement benefit by  SARS. The benefits are tax free.

    2) Waiver of Premium Protects Against Disability.

    This can be useful if you become disabled and are wondering how your life insurance policies will still be paid. It is an optional benefit to a life insurance policy, with costs varying with every insurer. Some of these waiver of Premium Rider add-ons have waiting periods where you can claim benefits. Disability or illness are qualifying conditions under the waiver of premium rider.

    A policyholder has to be disabled for a certain period before the premiums waiver becomes effective. The waiver is hugely beneficial to those where their disability prevents them working.

    3) Asset Creditor Protection.

    This protects the policyholder from litigation. A properly structured permanent life insurance contract is an effective addition to your retirement plan.

    Not all life insurance policies are the same, with the right policies being high cash value, with fees being built into the policy to discourage early withdrawal. The idea is to make sure you understand what your policy structure looks like, how liquid it is and if there are costs involved.

    Buying Life Insurance – Look Forward to a Sound Retirement

    Look for policies that allow you to withdraw and borrow amounts of the premium from the policy without significantly reducing the death benefit.

    These 3 benefits can help you ensure that you build wealth instead of seeing it whittling down to precious little. If you can reach out to Mike Mitchell for advice, reach out to another financial expert you feel comfortable with. This way you can prepare well and look forward to a sound retirement.

    Next step: Submit the completed form on this page to contact us. We will return with a life insurance quote

    All info was correct at time of publishing