10 Reasons to Get Life Insurance
When working on your financial planning, make sure that you are including life insurance. You may be thinking that you don’t need it right now - you aren’t married, you don’t have property, you don’t have a family - there are many reasons that life insurance gets pushed to the bottom of the list. Luckily there are tools to help you make the right decisions.
The first thing is to determine how much life insurance you may need. And why you are buying it in the first place. This legal contract between an insured and an insurer, usually a life insurance company, requires premiums and guarantees a payment given to the insured's named beneficiary upon his or her death. But insurance proceeds can go toward a number of financial obligations. Here are some reasons that might help you make your decision.
1. INCOME REPLACEMENT. If you are a breadwinner in your home, insurance can help pay the bills or offer savings potential when your income is no longer coming in.
2. FINAL EXPENSES. With funeral and burial costs totaling more than $10,000, the death of a love one can leave quite a financial burden. Life insurance can help subsidize or cover these and other medical costs.
3. ESTATE LIQUIDITY. When an estate is inherited, there are many taxes your beneficiary will have to cover. From paying income taxes to federal estate and state inheritance taxes, insurance policies can provide some help.
4. LOCKING IN A LOW PREMIUM. Premiums increase as people age. To optimize benefits, buying life insurance at a young age can lock in a low premium.
5. TRANSFERANCE OF FAMILY WEALTH. Life insurance policies can allow you to leave more money to your family as part of your estate.
6. BUILDING CASH VALUE. Whole or universal life policies offer a tax-advantaged way to build cash value.
7. COVERING DEBTS. A life insurance policy can help pay off a mortgage loan so beneficiaries can continue to live in the home or to remove the immediate need to sell it. Debt can be inherited, and then follow your family around for years if they have to go into foreclosure or even declare bankruptcy. You can see how your debt is currently impacting your credit scores for free on Credit.com.
8. BUSINESS SUCCESSION. For a family business or otherwise, the continuity and succession may require costs like a stock redemption buy/sell agreement or cross-purchase. To protect your descendants and your company, life insurance can provide important funds.
9. TAX BENEFITS. Especially for high-income earners, policies can provide a tax shelter and alternative to IRA options.
10. CHARITABLE GIFT. A life insurance policy can help make a big impact to a cause important to the newly deceased. This could be done by donating the policy to charity or by naming the charity as beneficiary.