Many people just don’t understand the many reasons, why they need to have life insurance. Financial professionals like Dave Ramsey, and Suze Orman, always recommend you should take it out, but how does that exactly relate to your personal situation? We know thinking about life insurance isn’t fun. It’s not a fun purchase, but it is an important one, for your financial plans.
In this article, we are going to review five reasons, why you should consider life insurance.
To cover your final expenses
Unfortunately, we are not going to live forever. What many people don’t realize, are the costs associated with funerals and burial expenses. Troy Smith of Burial Insurance Pro’s says “Many people forget that it may cost well over $10,000 to cover burial expenses, funeral costs, and other final expenses. One way to take care of this obligation is to purchase a final expense insurance policy, to address these needs. When a person has a policy like this, at the time of their death, the family receives a lump sum death benefit, to take care of all these ‘loose ends.’ ”
To replace your income
One of the most important factors when choosing life insurance is to consider what would happen if you died, and your annual income went away. Many people, including financial professionals, recommend a life insurance policy, that at a minimum, replaces 10 years of your annual income. In the event of you passing away, during your working years, life insurance could be utilized to help your family replace that lost income, and for them to keep their quality of life.
To pay off your debts
In a perfect world, at the time of your death, your debt obligations would disappear. But that’s not the case at all. If you’re single, and have student loans, credit card debt, and car loans, when you die, your family would still be on the ‘hook’ to take care of these expenses. Or if you have a family, you again probably have an outstanding mortgage and other debts. Life insurance is a great financial product to be taken out and to be used to address these types of concerns. At the time of your passing, life insurance could be used by your family, to take care of all these debts. No one wants to leave their family in a bad financial situation. Life insurance was designed to give you peace of mind!
To address estate taxes
As you transition into your retirement years, many people mistakenly feel like life insurance is no longer needed. Depending on your financial position, there’s a good chance that estate taxes may need to be addressed. Most people may not have enough liquid assets to address these taxes, at the time of your death. One way to alleviate this concern is to have a life insurance policy in place, for your beneficiary to use to cover these taxes. Often times this is the easiest way to account for these types of taxes.
To be used if you have significant health issues
I know, you are thinking how can life insurance be used, if I were diagnosed with severe health issues. Many people get confused by this. Over time, life insurance companies have changed, how life insurance policies, can be used. No longer does life insurance only payout, at the time of death.
Many life insurance policies now come with ‘living benefits’ that allows the insured to accelerate the death benefit, if certain qualifying events happen. These riders are what we refer to as Chronic, Terminal, and Critical illness riders. Some example of health issues that allow you to access part of the death benefit are Cancer, Heart Attacks, or strokes.
If needed, you could select to accelerate part of the death benefit, while living. This allows you to access a pool of money, that could help you and your family with living expenses.
As you can tell, there are several different reasons for owning life insurance. We hope that if you’ve been on the fence about purchasing some, you won’t hesitate to pull the trigger and begin addressing this important financial decision. Life insurance is flexible, and everyone’s situation is different. But the one common thing is that almost everybody needs a form of it!