Life insurance is an important part of any good financial planning. For those who have loved ones depending on them, the proceeds from a life insurance policy can provide the necessary funding for paying off debts, replacing ongoing income for living expenses, and paying costly estate taxes that may be due. It can also pay for final expenses, which today can oftentimes exceed $10,000.
There are many reasons why people purchase life insurance – and, while all situations are different, typically the 5 most common reasons people need life insurance protection include:
1) Income Replacement
One of the biggest reasons people purchase life insurance is to replace income. Should an income earner pass away – especially one who has a spouse and small children depending on them – it could be devastating. When families are suddenly left without incoming cash, they are unable to pay rent or mortgage, utilities, transportation costs, food costs, and any of their other necessities. This can quickly result in the need to drastically change their lifestyle.
By owning life insurance, the policy’s proceeds can be used for continuing income, so that children do not need to change schools or be uprooted from their homes and change their lives during an already difficult time.
When using life insurance as an income replacement tool, it is important to insure that you have enough. For example, consider how much it would take to invest in a 3 to 4 percent interest rate environment to replace your annual wage – without dipping into principal. This could produce income for an indefinite period of time, and allow loved ones not to worry about income running out over time.
2) Payoff of Debt
The payoff of debt is another reason that many people purchase life insurance – with mortgage being a key criteria. For many people, our homes are the biggest purchase we will ever make. Yet, if that home is purchased in conjunction with a spouse or partner, it may need to be sold quickly should one of them pass away unexpectedly.
A life insurance policy can allow the payoff of the mortgage, in turn, enabling the survivor to keep the home. Policy proceeds can also pay off other debts such as credit card balances, business debt, auto loans, or other personal debts so that survivors are not saddled with these ongoing payments.
3) Payment of Final Expenses
Today, the average cost of a funeral is approximately $9,000. In many cases, it is difficult for loved ones and survivors to come up with this amount of money quickly. Having life insurance allows a solution for paying these costs, without the need to dip into savings or other assets in order to do so.
Final expense life insurance policies can be purchased in smaller dollar amounts. Upon the death of the policy holder, proceeds can typically be received quickly so that final expenses may be paid, allowing survivors to concentrate on other, more pressing matters.
4) Estate Taxes
Life insurance is also purchased for the purpose of paying estate taxes that may be due. In some instances, estate taxes could be more than half of one’s net worth – essentially leaving very little for loved ones, even after a lifetime of hard work.
By purchasing life insurance, funds will be available for the sole purpose of paying off the taxes that are due, thus leaving other assets for family and other loved ones – for their originally intended purpose.
5) Charitable Giving
Life insurance is also often used for giving to charities. By giving in this manner, people are able to provide so much more than they could during life – for literally pennies on the dollar. There are numerous ways to give to a charity through life insurance. One way is to simply name the charity as the beneficiary of the life insurance policy. Another is to provide the policy dividends to the charity (from a permanent life insurance policy). Working with an attorney who is knowledgeable in this area can help.
Additional Reasons to Purchase Life Insurance
There are many other reasons for purchasing life insurance as well. For example, many people want to fund future expenses with this type of funding vehicle. Purchasing life insurance can help to fund a child’s future college education, pay for a child’s future wedding, or help to put a down payment down on a child’s future first home. Overall, purchasing life insurance can truly help you to keep your promises.
How to Purchase the Life Insurance Protection You Need to Protect the Ones You Love
When you’re ready to purchase life insurance, there are several things you will need to do prior to signing on the dotted line. First, you will want to determine your exact needs. This means, carefully clarifying exactly what it is that you are covering. This will help you in coming up with how much coverage you will need. It will also help you in determining whether a term life policy or a permanent life insurance policy will suit your coverage needs better.
When shopping for the best life insurance policy, you will also want to work with a company that has access to numerous life insurance carriers. This way, you will be able to compare policy benefits, as well as premium quotes, in order to see what is available to you. In doing so, we can help you.
We work with many of the top rated life insurance companies in the nation, and we can help you in comparing the policies and the premiums for the coverage that you are seeking. When you are ready to get the process started, just Click Here. If you have any questions, please feel free to contact us and ask, toll-free, at 864-491-5785. We’re here to help.