Considerations Before Buying Life Insurance

The final section consists of three parts of life insurance and will discuss additional considerations for life insurance: such as the treatment of yield taxes, information on your contract, appointment of beneficiaries and payment of death benefits.

Asuransi Jiwa

Tax treatment

The death benefits received by beneficiaries of life insurance policies are usually not taxed, as the IRS explained in publication 525, regarding taxable and non-taxable income.

If you buy a life insurance policy for someone else and receive the results when they die – however, a change is called settlement of life or settlement that is related – which makes the income taxable.

Other exceptions will occur if the beneficiary receives the results as part of the annual payment instead of repayment.

Annual payments will be taxable, but if the insurance company pays interest on the payment, the interest will be taxed.

In addition, if the deceased has large land so that it will be subject to state tax, the beneficiaries of life insurance will pay taxes on the value of life insurance in excess of the land tax. Planning strategies are needed to avoid this problem.

Standard provisions

Read the life insurance policy contract the first time you get it to make sure you understand how the policy works.

Whatever type of life insurance, each contract will have a summary page with the policy points, such as how many death benefits from the policy and additional records which one you should buy, followed by a standard contract that describes when insurance will start, renew and end.

When will the death benefit be paid and not paid and when it is adjusted; when premiums are due and what will happen if you don’t pay them; what choices do the policy have, such as conversion rights; and information about naming beneficiaries and transferring policies.

There will be a section that explains all the provisions used in the policy, such as “number of people” and “insured”. Life insurance with a cash component will also explain how the policy is rejected, and what are the policy requirements for the policy.

Benefit recipients

Appointment of beneficiaries, who will receive the death benefit of the policy if you die when the policy is still valid.

There must be a choice between the primary beneficiary and partly to ascertain who is entitled to receive the benefits you have paid, even if the primary recipient dies before you.

For example, you want to appoint a wife as the main beneficiary and your brother as a partial beneficiary.

If the policy has more than one beneficiary, you need to determine what the death benefits are for both.

Choosing a “per capita” distribution means that each beneficiary will receive the same amount of death benefit, while choosing a “per share” distribution means that each beneficiary dies if one of the beneficiaries before you, one of the children of that person will receive the share.

If you don’t have children, other surviving family members have the closest relationship with you who will receive their share.

By appointing irrevocable beneficiaries, you cannot change beneficiaries without the person’s permission.

Life insurance with irrevocable beneficiaries is sometimes used on divorced families to ensure that the obligation to provide for the ex-spouse continues to be carried out no matter what happens, such as offering a college for their child.

Cancelable beneficiaries are more general and allow you to change the beneficiary policy whenever you want by completing the documents provided.

Distribution option

Death benefits can be paid as a repayment distribution or through installment options. With distribution, beneficiaries receive the overall death benefit policy for once, which can help pay the final costs and manage after-death costs such as debt that must be repaid.

This option can make the mind calm and good if the beneficiary is able to use the funds wisely.

With the installment option, beneficiaries get regular payments from continuous death benefits until the death benefit runs out.

This can be a good choice for beneficiaries who do not use the intended results if they receive it in one payment at a time.

Other situations where the installment option can be good if your child is a beneficiary and you do not want him to receive $ 500,000 at the same age of 25 which can discourage them from working.

If you want, you can choose how the beneficiaries will get results. If not, the choice will depend on the beneficiary based on what the insurance company offers. The following are the most common options:

Straight income option

One of the beneficiaries receives regular payments from the death benefit policy, but the payment ends when the beneficiary dies and does not transfer the payment to anyone.

Combined income option

Two beneficiaries receive regular payments from the death benefit policy, but the payment ends when the beneficiary dies and the payment is not transferred to another person.

Fixed period options

The insurance provider will pay the results to the beneficiaries in a certain period, such as once every 10 years. Payments can be made monthly or annually. The amount is not always the same in every payment. Payments will continue until the death benefit runs out.

Interest income option

The number of death benefit policies will remain in the insurance company and beneficiaries receive regular payments from interest income generated by the death benefit. At the end of the year you choose, beneficiaries will receive the benefits of all deaths at once.

Certain period of income

If the beneficiary who gets a monthly or annual income dies before the death benefit runs out, the second death beneficiary will get the remaining payment until the death benefit is exhausted.

Reimbursement income: If the beneficiary who gets monthly or annual income from the death benefit policy dies before the death benefit runs out, the second beneficiary will receive the remainder at once.

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