Why You Need Life Insurance
Life insurance has a variety of uses. Some of the reasons why people have life insurance are:
- Income replacement: It protects your family’s standard of living by providing funds to replace the income you used to bring in. Besides the normal living expenses, there now may be additional expenses like childcare, cooking, cleaning, and lawn care.
- Pay off debts: It can enable your family to have enough money to pay off the mortgage, car loans, student loans, and credit cards. Relieving debt obligations can provide some comfort to your spouse and family.
- Provide retirement income: Life insurance proceeds can be used to fund retirement goals. Since the proceeds provide necessary funds, instead of spending down retirement accounts, you can keep them intake to grow for the future. You can also set a certain lump sum aside as a way of pre-funding retirement goals.
- Fund other goals: You probably have more financial goals than just retirement. Life insurance can also help fund college expenses, new cars, and future family vacations.
- Create an estate: You may want to leave an estate to your family or friends. However, if you are young or haven’t accumulated enough assets yet, the proceeds from a life insurance policy can create a larger estate.
- Philanthropy: You may have a favorite charity or cause you’d like to contribute to, but you don’t feel you have enough income or assets to give regularly. You may want to create a legacy and be remembered for your generosity. Life insurance can help you meet both these goals.
- Settle an estate: If your estate is large, your family may have to pay estate taxes. Life insurance proceeds provide liquidity to pay taxes and final expenses without having to sell assets to come up with funds.
- Business purposes: As a business owner you may use life insurance to protect your family’s interests, provide liquidity to continue operations, or to buy out your ownership in the business if your family is not interested in running it. You may also use it as a benefit offered to employees and key personnel.