As a conversation starter, life insurance is darn near guaranteed to be followed by the type of silence normally found only in a hearing-test chamber. After all, when you talk about life insurance, you’re really talking about death. And who wants to do that? So, allow me to break the silence and provide a few tips to help get your conversation started when it comes to this all-important coverage.
Tax-free death benefits. I’m surprised how often I’m asked about the income tax burden of life insurance benefits. The typical answer: None. That’s because life insurance proceeds, whether $10,000 or $10 million, are generally income tax free.
Term may switch to perm. “What’s better, term or perm?” is a common life insurance question. I normally encourage people to look at why they are buying the coverage to come to an appropriate answer. For example, term insurance is likely the right answer for coverage intended to cover expenses associated with raising kids because eventually (fingers crossed), they will be financially independent. However, if you land in a situation where permanent coverage seems more appropriate than your existing term, conversion may be the answer. Many term policies offer the ability to convert a term policy to permanent coverage. Check with your insurer for the rules, deadlines and costs associated with such a move.