Life Insurance

Why Is Life Insurance Important?

Very few of us like to talk about the topic of life insurance. However, those who have it are glad they spoke with someone before the unexpected happened and they needed it. Life insurance is an important part of meeting your family’s long-term financial needs. Let’s take a look at some reasons why having a life insurance policy is a good idea.

It Provides Protection

Your family depends on you financially. If something happens and you are no longer there to provide, your beneficiaries will receive money from a life insurance policy. This money is known as the death benefit. The family will be able to pay bills, pay off a mortgage, fund college, or handle other expenses without the additional stress and worry during a difficult time.

You could use a term policy which provides maximum coverage for the lowest price. However, the time the policy will be in force will only last for only 10, 20, or 30 years. After that, you would need to obtain another policy, if possible, that will likely be much more expensive.

You could purchase a whole life policy. This policy will never expire as long as premiums are paid, but it can be expensive depending on how much coverage you want. An additional benefit is that you will also build up some cash that you could borrow for a rainy day.

Another option is universal life insurance. Universal life combines the longevity of whole life with the lower cost of term. You just have to make sure your premium payments are sufficient to keep the policy in force, so it does not lapse. Universal life also lets you adjust your premium payments as long as there is enough cash value in the policy to cover the monthly charge.

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Replacement of Income

Practically everyone has bills. Food, clothing, housing, utilities, car repairs, and healthcare probably make up the majority of your monthly budget. If you are not there to help the family take care of these expenses, they will not go away. The proceeds from a policy will provide the means for your family to cover these costs.

Getting Rid of Debt

All of your debts do not suddenly vanish when you die. Your loved ones may have to use the money from your estate or sell other assets to pay off the debts you leave behind. In effect, they are left with less money to pay for expenses.

The proceeds from a life insurance policy can pay for credit card debt, educational loans, mortgage debt, business and personal debt. Having the money to pay for these costs really provides peace of mind for those dealing with the loss of a loved one.

Funeral Expenses

How many times have you heard of a family member passing away and the rest of the family had to pay the costs of the funeral out-of-pocket? Having to worry about finding money at a difficult time just adds to an already emotionally stressful situation. A policy in place to handle these costs greatly helps in times of crisis.

Future Educational Expenses

Even if you are saving for college with a 529 college savings account, there are going to be additional educational expenses in the event you are not there to help. In the case of small children the surviving parent will need to pay for childcare, and a college student will need money for more than tuition, books, and room and board. Proceeds from a life insurance policy will help defray out-of-pocket costs.