Life insurance can provide a secure foundation for your financial planning program. Life insurance provides much needed financial security in several situations. Here are six reasons why you need life insurance:
- Providing replacement income for your dependents – If people depend on your income, life insurance can replace your income for them if you die prematurely. A common example of this scenario is parents with young children. This also appliesto couples for which the survivor would have financial difficulties if they no longer had the incomeof their partner.
- To pay your final expenses – Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
- Create an inheritance for your heirs – Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
- Pay federal and state Death Taxes – Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal “death” tax rules betweennow and January 1, 2011 will likely impact this tax on some people.
- Create Savings for your Spouse or Family Members – Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their lifeinsurance policy premiums a high priority, buying a cash-value type policy can create a kindof “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt ifthe money is paid as a death claim).
- Protect your business – Life insurance for business may be taken out for several different purposes. One purposeis to provide for the successful liquidation of your financial interest in the business for thebenefit of your heirs. If you have a business partner, you should each have a life insurance policy, enabling an automatic buyout of the interest of the deceased. It protects the estate of the deceased, and ensures the continuation of the business.