Why do I need life insurance? This is a question that you may have asked yourself at some point. You know how the saying goes, there are only two things that are certain in life: death and taxes. This article will go over the major reasons why life insurance is needed by most people.
Let’s look into why life insurance is needed and if it is a purchase you should be making.
Top reasons why life insurance is needed
Here is a list of the top 13 reasons why you may need life insurance.
1. Final expenses
At the very least, you want a life insurance policy to cover your funeral and other final expenses after you have died.
2. Income replacement
This is probably the second most common situation people look to buy life insurance. Replacing your income with life insurance and making sure your family doesn’t fall on financial hard times is a great strategy.
3. Payment of debt
Accumulating debt is not uncommon. Situations such as credit card debt, car payment, mortgage, and student loans. Life insurance will help greatly in addressing these issues if you were to die.
4. Second marriage
What if a parent remarries? This can cause some tension is some situations where there might be a conflict with the children and new spouse. With a life insurance policy, a parent can provide their new spouse some financial security. It also will allow the children to immediately receive their deceased parent’s estate.
5. College or education
Will your surviving spouse be able to pay for your children’s education if you were to pass away? Life insurance will help make sure that your children’s education is paid for.
6. Special needs children
Do you have a child with special needs? Life insurance can help make sure your child has the money to fund their care.
7. Emergency funding
Medical bills as well as any additional expenses that may come up. You may need more time off from work to deal with the loss of your loved one too.
8. Taxes for your estate
Your life insurance policy can provide liquidity to help cover the estate tax liability. Make sure to check with the current tax laws or if the estate tax is repealed.
A life insurance policy can be setup to provide a death benefit to a favorite charity or organization. This can be done without significantly decreasing the size of your estate by having the benefit replace the worth of the property gifted to the heirs of the estate.
A life insurance death benefit can make sure each child receives equal shares of the parent’s assets by providing added liquidity.
11. Tax protection for your beneficiary
You may own several assets that haven’t been taxed. Your beneficiary will be responsible for the taxes on these assets. Your life insurance policy will provide your beneficiary the liquidity required to cover these tax payments.
12. Business continuation
Business partnerships can become very stressful when an owner dies. A life insurance policy can make sure a smooth transfer of ownership occurs.
13. Business insurance
There are a variety of ways that life insurance for business can be used. Executive Bonus, Deferred Compensation, Key Person (aka Key Man), and Split Dollar are the most common situations.
Do I need life insurance?
So now you have a good idea of why you may need life insurance. But what types of life insurance are available? What type of life insurance policy should you purchase? How much will it cost? Who are the best life insurance companies to buy from?
Find those answers and more by visiting our Life Insurance 101 and our Life Insurance Types pages.