It is a sobering fact that many Americans do not have adequate life insurance coverage. According to a September 1, 2010 State Farm report, 68 million people are not covered, though it is possible the number is much greater.
For those who do have insurance, many are unaware of the benefits their policies can provide during their lifetimes.
According to Steven Weisbart, chief economist with the Insurance Information Institute, when an insured person pays life insurance and that investment is paid back to the insured over a period of time, that payment is called an annuity. The III offers much more detailed information about annuities on their website.
An annuity is, in its most general form, a contract to pay a series of payments for a specified length of time.
“Life insurance benefits can be taken in an annuity form,” Weisbart said. “An annuity is a contract to pay a series of payments for a specified length of time. All annuities have some element of tax-deferral.”
Also, in some annuities, the amount of money paid in through a single premium or through periodic payments is considered “before tax” money. Weisbart goes on to note that tax on the income that provides the premium is also deferred until it is withdrawn from the annuity.
For business owners, according to State Farm, life insurance cash values can be assessed and used to purchase the shares of a business partner who is planning to retire. A business owner can also use life insurance to retain talented employees by using the policy as part of a retirement or bonus package.
Also, according to State Farm, another advantage is a parent or grandparent’s ability to access the accumulated cash value of their life insurance policy to help pay for their children’s or grandchildren’s college expenses.
Both consumers and business owners can benefit from learning more about life insurance and annuities and the advantages they can provide.