Why should I buy life insurance?
Many financial experts consider life insurance to be the
cornerstone of sound financial planning. It can be an important
tool in the following situations:
1. Replace income for dependents
If people depend on your income, life insurance can replace that
income for them if you die. The most commonly recognized case of
this is parents with young children. However, it can also apply
to couples in which the survivor would be financially stricken
by the income lost through the death of a partner, and to
dependent adults, such as parents, siblings or adult children
who continue to rely on you financially. Insurance to replace
your income can be especially useful if the government- or
employer-sponsored benefits of your surviving spouse or domestic
partner will be reduced after your death.
2. Pay final expenses
Life insurance can pay your funeral and burial costs, probate
and other estate administration costs, debts and medical
expenses not covered by health insurance.
3. Create an inheritance for your
heirs
Even if you have no other assets to pass to your heirs, you can
create an inheritance by buying a life insurance policy and
naming them as beneficiaries.
4. Make
significant charitable contributions
By making a charity the beneficiary of your life insurance, you
can make a much larger contribution than if you donated the cash
equivalent of the policy’s premiums.
5. Create a
source of savings
Some types of life insurance
create a cash value that, if not paid out as a death benefit,
can be borrowed or withdrawn on the owner’s request. Since most
people make paying their life insurance policy premiums a high
priority, buying a cash-value type policy can create a kind of
“forced” savings plan. Furthermore, the interest credited is tax
deferred (and tax exempt if the money is paid as a death claim).
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