Have you ever wondered what it would be like for your family if something happens to you and you are no longer the earning member of the family? Life is basically uncertain and anything could happen to each one of us at anytime. Even though it is impossible for us to fight against the inevitable, we can do something about it by taking the necessary preparation to meet the emergencies head on if it is required.
Life insurance is such a policy that allows you to secure the condition of your family and loved ones once you are gone. If something happens to you, and your family members are not capable of making both ends meet, it would be a pathetic situation for your loved ones to be in. that is why it is a personal responsibility of yours to fix up a life insurance so that your family will be taken care of when you are not here anymore. However, life insurance is taken for different reasons. A lot of people take insurance because of estate transfers or to meet their business goals, so that they are not set back financially by monetary losses.
Depending on what you need and what you want to acquire, there are many life insurance of various types that you can choose from. Plus, many companies offer insurances on same coverage but the prices they all offer are different. If you come across any financial planner, you would find that they all agree that every family must carry a life insurance that is worth ten times your total annual income.
To start looking for insurances, you need to first assess and decide on the life insurance amount that you want. Then you have to take time and consider which life insurance policy is the best one for you that meets all your demands, and would also be able to provide the amount that you need. Your expected quality should be high where the ratings of financial stability is concerned, and accordingly look for the companies which meet your preferred standard. Keep on looking until you have found the best price. And then put in all your efforts to get a very good life insurance rate.
Remember that all life insurances need a change after a certain period of time, so do not forget to get your life insurance policy re-evaluated after regular intervals. You can do it in every five years or whenever you go through any events that would have an effect on your bank balance, like income, marriages, or divorce or when you buy a new house or become a parent.
Tip: Consider premium splitting or cross-life insurance
If you have a partner and you are not married in an overall community of goods, consider taking out your life insurance cross-insurance or premium splitting so that your partner may not have inheritance tax.
What is premium splitting?
The premium for a life insurance policy on 2 lives is split into 2 parts: for you and your partner. These 2 premium parts are often mentioned on the policy, but not with every insurer. In the latter case, the application form serves as proof that premium splitting has been applied or should have been applied.
What is cross-off?
Crossing off means that you are the policyholder (and premium payer) and your partner the insured. The policyholder is the person who takes out the life insurance policy. Suppose you and your partner take out 2 separate life insurance policies, then you can cross them. On one policy you are a policyholder and your partner is insured. It is the other way around on the other policy. In that situation there is therefore no premium splitting, because on every policy there is only 1 insured person.
Saving inheritance tax
Inheritance tax is the tax you pay on the estate of a deceased person. In principle, a benefit from a life insurance policy also falls in the estate. An exception applies if the beneficiary, i.e. the recipient of the death benefit, has paid all the premiums himself.
With premium splitting and cross-closing, it is especially important that the policy is drawn up correctly. Then it is not necessary for the premium to be paid from the beneficiary’s account. It may also be paid from the joint account.
As cohabiting partners for a number of years or married couples you have a high exemption before you have to pay an inheritance tax. Many people do not come across that exemption. But despite that it is still wise to opt for premium splitting and cross-off.
Community of goods
If you are married in an overall community of goods, it makes no sense to apply premium splitting and cross the life insurance policy crosswise. In that case there is no question that your partner has paid all premiums himself.
So follow the instructions listed above before you go looking for any insurance. This step is an important decision in your life which will affect the financial condition of not only your family but your heirs as well.