Life insurance is one of those things you’re expected to have. But why do we need life insurance? Is it really worth the cost?
Don’t blindly accept that you need to buy a policy. Instead, consider these 10 reasons why we need life insurance.
1. To replace lost income for your family- The most obvious reason why we need life insurance is to provide money to replace our income if we die so that our families can maintain their standard of living. Even in two-income families, the loss of one income can be overwhelming without adequate life insurance.
2. To cover burial and funeral expenses- Even if you don’t have family to provide for, you still need life insurance to pay for your burial and funeral so that you don’t financially burden adult children, siblings, or others with those costs.
3. To pay medical expenses associated with your death- Unfortunately, many deaths are prolonged and a mountain of medical bills can accumulate.
4. To pay off a mortgage or other debts- Medical bills aren’t the only debt you need to worry about. A life insurance death benefit can allow your surviving family to eliminate monthly house payments, car payments, credit card bills, or other debt obligations.
5. To provide money for settling your estate- If there is an estate to be settled, death benefits are paid immediately upon death, so money will be available to pay costs related to the estate (e.g., taxes) while it’s being settled.
6. To leave an inheritance- A life insurance policy is a great way to leave money behind for your family or for a charitable cause. Unlike capital gains, death benefits are not usually taxable.
7. To provide for future needs of children- A life insurance policy can supply money for children to go to college. Or, in the case of special needs children, it can provide for ongoing care and living expenses.
8. To provide a source for emergency cash- Many insurance policies allow for cash accumulation, from which you can borrow. Although this borrowing will reduce your death benefit, you may want to have the option if a personal financial crisis arises.
9. To maximize your pension- When you retire you will likely be given an option to receive a higher pension in exchange for allowing the pension to stop when you die. With a life insurance plan, you can eliminate the need for an after-death pension, freeing you to select the higher-pension option.
10. To allow for business continuity- If you own or co-own a business, then life insurance that benefits the company is a way to protect the company’s future in case you die. The same issues that apply to families apply to businesses—if a vital income creator dies, there needs to be money to make up for the loss.
As there are many reasons why we need life insurance, buying life insurance is a purchase no one should put off. But don’t rush it, either. Buying life insurance off a website or by going directly to a major carrier is a fast way to buy insurance, but it’s not the wisest.
Be smart with your money. Consult an independent life insurance agent who understands all the reasons why we need life insurance and has the market experience to find the best deal to meet your specific needs.