Q: How much life insurance do I need?
- To arrive at the amount of life insurance you require several factors must be considered. These include your income and marital status (your spouse’s earning capacity) and how many people are dependent on you financially. Other factors are the amount of death benefits that would be expected from any employer-sponsored life insurance plan and whether you have any special financial needs such as mortgage repayment, estate planning, education funding, etc.
Q: Do I need to buy cash value life insurance or term insurance?
- This also depends on your personal circumstances. More expensive cash value life insurance has a cash amount you can withdraw before death while term life insuranc pays out only in the event of death. If you need a large amount of insurance a term life insurance policy may be your only affordable choice as it carries lower premiums than cash value policies. Some factors to consider in making this choice are your income tax bracket, whether the need for insurance will be short-term or long-term and what rate of return you can expect on other investments you have.
Q: Is credit life insurance a good buy?
- When you take out an installment loan for debt consolidation, purchase a new car or buy expensive appliances the salesperson will often recommend purchasing a credit life insurance policy. This is usually not a good buy as the cost is quite high and you may own enough life insurance on your standard policy to cover these debts.
Q: Are there tax considerations in buying Lincoln life insurance with cash value, dividends or death benefits?
- The interest portion of the annual increase of cash value in a life insurance policy is not taxable. Dividends are not taxes as they are considered a “return of premium”. For questions regarding possible estate, income and gift tax consequences of any life insurance policy it is recommended you consult your tax adviser.
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