Advantages of life insurance include financial protection in the event of an accident or unfortunate event, while disadvantages include undergoing the time-consuming and tedious process of searching for and selecting a plan, and sacrificing money for coverage. Life insurance classifies as a term insurance, meaning that it has a finite period of coverage. Like other types of insurance, consumers search for policies and plans in several categories, including basic-level coverage, mid-level coverage, and high-level coverage, which typically requires the largest financial investment and offers the most comprehensive coverage.
Life insurance comes in packages for individuals and families. It breaks down into smaller sub-categories, including estate planning and family planning. One advantage of life insurance is tax benefits. Certain benefits, called death benefits, pass along to beneficiaries and family members free of income tax and estate tax, provided they begin with proper ownership and management.
Life insurance policies also contain cash values, which remain isolated from taxable income, letting them accumulate and gain interest while steering clear of income taxes. Life insurance also allows policy loans, which enjoy freedom from taxation.
Most companies offer flexible plans and policies, letting policyholders make adjustments. However, life insurance typically carries expensive premiums. Regardless of plan, investors may never recover the cost of their premiums, especially when surrendering policies.