Advantages & Disadvantages Of Life Insurance

Advantages Of the Life insurance:

Life insurance provides an infusion of cash for dealing with the adverse financial consequences of the insured's death.

Life insurance enjoys favorable tax treatment unlike any other financial instrument.

Death benefits are generally income-tax-free to the beneficiary.

Death benefits may be estate-tax free if the policy is owned properly.

Cash values grow tax deferred during the insured's lifetime.

Cash value withdrawals are treated on a first-in-first-out (FIFO) basis, therefore cash value withdrawals up to the total premiums paid are generally income-tax free.

Policy loans are income tax free.

A life insurance policy may be exchanged for another life insurance policy (or for an annuity) without incurring current taxation.

Note: All of the above statements are generally true; however the tax benefits of life insurance have certain limitations which under the wrong set of circumstances can cause the tax benefits mentioned to be lost.  Please discuss with your insurance and tax adviser.

Disadvantages Of Life Insurance:

The life insurance purchase decision and the positioning of the life insurance can be complex especially if the insurance is for estate planning, business situations or complex family situations.

The life insurance acquisition process can be annoying and perplexing (e.g. Is the life insurance agent trustworthy?  Is this the right product and carrier?  How can medical underwriting be streamlined?).

Policyholder forego some current expenditure to pay policy premiums. .Moreover life insurance company take cash for him not for the benefits of a man.

Cash surrender values are usually less than the premiums paid in the first several policy years and some time a policy owner may not recover the premiums which are paid before.