Why You Should Have Life Insurance?

So now that you understand what life insurance is – the next big question is do you need to purchase life insurance? Life insurance is designed to protect your family and other people who may depend on you financially. If your income is lost due to your death, then your dependents will lose your financial support and so purchasing life insurance can help cover some or all of that loss. To figure out if you need life insurance, you need to think through the worst-case scenario. If you died tomorrow, how would your loved ones fare financially?

Here are some guidelines to help you decide if life insurance is the right choice for you:

1. You are married – Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain its standard of living on your spouse’s income alone? If not then life insurance will ensure that your family’s plans for the future will not also die when you do.
2. You are a work-at-home parent – A parent who does not earn a salary may not contribute financially to a family but child care, cleaning, cooking, transportation and other household activities are all vital tasks and the replacement value of this will cost a family financially. Could your spouse afford to pay someone for these services? With life insurance, your family can afford to make the choice that best preserves their quality of life.
3. You are a single parent – As a single parent, you have a huge responsibility to your child and cover many roles such as caregiver, breadwinner, cook, chauffeur, and so much more. With this responsibility resting on your shoulders, you need to ensure that you have enough life insurance to safeguard your children’s financial future.
4. You are retired – In the event of your death, your heirs could be liable to pay a large estate tax payment on your estate. The proceeds of a life insurance policy are payable immediately, which will enable heirs to take care of your estate taxes, funeral costs, and other debts without having to hastily liquidate other assets. If your insurance program is structured correctly, then your life insurance policy will not be added to your estate tax liability and your life insurance proceeds are generally income tax free and can be arranged to avoid probate.
5. You are a small business owner – Life insurance can also protect your business. What would happen to your business if you, one of your partners, or perhaps a key employee, died tomorrow? Life insurance can help in a number of ways. For example, a life insurance policy can be structured to fund a ‘buy-sell’ agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, ‘key person insurance’, payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement.
6. You are single – There are also instances where life insurance can be beneficial even if you have no dependents, For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they would not want to pass on to family members who survive them such as, education expenses and funeral cost

Although it is not a pleasant thought, you need to be realistic and establish what will happen to those around you when you die?

The acceptance and awareness of your death can give your life clarity and encourage you to make special provisions for your family’s’ future after you pass away.

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