The Consequences of Not Having Life Insurance
What is Life Insurance?
Life insurance is an agreement between the policyholder and an insurer, where the insurer agrees to pay a selected beneficiary a sum of money upon the policyholder’s death. However, terminal or critical illnesses can also be eligible for disbursement.
While the immediate protective benefit is understood, its significance’s breadth and depth extend far beyond the surface. As an essential element of financial planning, life insurance represents a promise of security to your loved ones. Neglecting this component can create ripple effects with both personal and societal implications.
Keep reading to learn about the consequences of not having life insurance from the experts at Canal HR.
Consequences of Not Having Life Insurance
A less acknowledged but highly consequential effect of not having life insurance relates to final expenses. Funerals and burials can be surprisingly expensive, often requiring a significant outlay of money. In fact, the average funeral price is almost $8,000. Without life insurance to cover these costs, the burden falls on the family or the deceased’s estate, potentially plunging them into a difficult financial situation that can take years to recover.
Life insurance is also essential when it comes to estate planning. It serves as a vehicle for the seamless wealth transition and can help address any liabilities that arise upon the policyholder’s death. Asset liquidation may be necessary without life insurance to meet these liabilities, disrupting the estate’s intended distribution and causing potential friction among the heirs.
Any outstanding debt, including student or personal loans, mortgage, or credit card debts, can be passed to your loved ones if you do not have life insurance, which can put them in a situation where they will struggle to meet their obligations and may put themselves in a dangerous amount of debt.
Loss of Income Replacement
If the deceased was the primary breadwinner and contributed significantly to the overall family income, the absence of life insurance can mean that your dependents will lose financial support. The lack of support can impact their standard of living and prevent them from pursuing education or other future endeavors.
Education and Future Planning
An additional layer of importance is observed when considering the long-term financial plans of the deceased, particularly plans pertaining to children’s education. Life insurance can provide funds intended for educational purposes. These plans might be derailed in its absence, with the children’s future opportunities at risk.
Inheritance and Legacy
Life insurance also serves as an inheritance for your beneficiaries. It can provide a financial cushion or gift for future generations. Without life insurance, the ability to pass on financial assets for inheritance and legacy becomes limited.
Benefits of Life Insurance for Employees
Employers can offer life insurance for their employees and provide much more than just financial protection, as discussed above. Also known as “group-term” or “voluntary term” life insurance, life insurance is easy to administer for employers, allows employees to receive a tax break, and is convenient and inexpensive. There are numerous benefits, including the following.
Voluntary term life insurance is simple to administer and doesn’t require constant monitoring. All of the required documents to enroll your team will be provided by the provider, meaning you do not have to go looking for hard-to-find forms.
Tax Break for Employees
When you provide life insurance, it’s tax-free for up to $50,000 in coverage for employees. According to the IRS, there are no tax consequences if the total amount of your policy does not exceed $50,000. Additionally, if you pay some of the premiums as the employers, the employees’ life insurance is tax-deductible.
Alleviate the stress and work by providing life insurance for your employees, which will also boost overall morale. Employees will then just have to select their beneficiaries and fill out a few forms rather than look for insurance on their days off or while on the clock.
Aside from already doing the research, set-up, and negotiation, you also reduce the cost of enrollment. When your employees enroll, there are no additional costs.
Partner with Canal HR and Ensure Proper Life Insurance Coverage
If you want to empower your workforce, you should offer life insurance. Providing life insurance is easy and convenient and eliminates the stress of not having life insurance. Our team will handle the responsibilities of choosing, administering, and managing your life insurance. We proudly partner with Transamerica Life Insurance Company to provide versatile life insurance plans with available spouse and child coverage.
To learn more about providing life insurance through Canal HR, contact us today.