Insurance - Life Insurance

Insuring your life provides protection against the economic loss caused by your death. So how do you determine if you need it or not? Does everyone? Well, chances are, if someone depends on you financially, you need life insurance. Life insurance will provide cash to your family once you pass on. This “cash” is known as the death benefit and replaces your income and can help your family meet important financial needs such as daily living expenses, monthly mortgage payments and etc. This will sufficiently help your family in the worse case that your death is unexpected. What’s even better is the life insurance benefits your family will receive is not subject to federal income tax laws.

Basically to figure out if you need life insurance or not, think of the worst case scenario; if you died tomorrow would your family and loved ones be in financial debt after your death? Would they have the money to pay for funeral expenses, medical bills, taxes, other debts, lawyer fees, and etc? And furthermore, would they have the financial ability to carry on with their daily lives and expenses, meaning rent/mortgage, food, clothing, transportation costs, healthcare, etc? These are vital questions that need to be factored into your decision when considering whether you need life insurance or not. The honest truth is, when a loved one dies it is a terrible emotional struggle. Having to combine that with financial struggles as well is not a scenario anyone wants to be in. Life insurance will help to make sure the people you love and care about will be provided for financially, even if you are not there to take care of them yourself.

Here’s a little outline to help consider your own personal situation:

Married- If you’re married your family more than likely depends on two incomes to make ends meet. If you suddenly passed on, would your spouse be able to continuing living a standard lifestyle comfortably on one income? Generally, the answer is no. Life insurance is almost crucial when there are two incomes involved. In the case of your death, your family would more than likely struggle tremendously financially after your death.
Single Parent- As a single parent, everything is on your shoulders. You are the cook, the chauffeur, the caregiver and so much more. With so much responsibility in your life, it is extremely important that you have life insurance to ensure that your children’s future won’t be doomed in the case of your sudden death.
Stay-at-home Parent- Even though you don’t add to your household’s annual income doesn’t mean that all of the work that you do at home should be taken unnoticed. The childcare, transportation, cleaning, cooking and other household duties you do are very important to your family running smoothly. Some surveys have estimated that the cost of these services can be over $40,000 a year! Clearly, your duties at home are underestimated. Could your surviving spouse afford to pay someone for these services? With life insurance, your family could make the choice that would help them best preserve their quality of life.
Children are self-supporting and the Mortgage is paid off- As the years go on you may feel the need for life insurance go away. But just because your kids have completed college and your mortgage is paid off doesn’t mean your set forever. Your social security and your savings may not be able to take care of everything that lies ahead of you. If you died today, your spouse would still be faced with daily living expenses. It’s very possible that your spouse could outlive you by 10 or even 30 years. Would your financial plan allow them to live comfortably, without life insurance, and maintain the lifestyle you worked so long and hard for? These questions are vital to your decision on having life insurance.
You’re Retired- Many people come to own estates once they have retired. Depending on the size of your estate, your heirs could be hit with a huge estate tax payment after your death. It could be up to 48% of your estate depending on your residing state. Life insurance policy proceeds are payable immediately. This allows your heirs to take care of your estate taxes, funeral costs, and other debts without having to quickly liquidate other assets in order to pay off your leftover debts.
Small Business Owner- Not only can life insurance help take care of your family after your death, but it can also protect your business. What would happen to your business if you, another owner or a key employee died tomorrow? Life insurance can help in a number of ways. A life insurance policy can be structured to fund a “buy-sell” agreement. This would help to ensure that the surviving business owners will have the funds to buy the company interests of a deceased owner at a previously agreed upon price. In this way, the owners will have the business and the family will get the money as well.
You’re Single- Most single people don’t really need life insurance because no one depends on them financially. However, there are exceptions. Some single people provide financial support for their aging parents or younger/older siblings. And others may be carrying a lot of financial debt that they wouldn’t want to pass on to their surviving family members. If you are in these types of situations, you should definitely own life insurance. You don’t want your loved ones to be burdened with your debts and finances after your premature death.