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Life Insurance
Life Insurance can be very easy to understand.
Just about everyone needs life insurance. What's more. no federal
income tax in collected on life insurance proceeds to a beneficiary. Life insurance is basic financial protection for your family. Because
families are different and circumstances are different, types of life insurance are different.
The role of life insurance is to provide a lump sum of money (the "death benefit") in the event of your death to:
- Cover your debts, including the mortgage
- Provide an income while the family makes the transition to continuing without you
- Provide a nest egg for family or a favorite charity
- Make sure children have money for post-secondary education
- Provide money to pay for burial expenses
Do I really Need Life Insurance?
The truth is losing someone you love is always difficult. But the emotional struggles
shouldn't be compounded by financial difficulties. Life insurance helps make sure the
people you care about will be provided for financially, even though you aren't available to
care for them yourself.
To help you understand how life insurance might apply to your particular situation. below
we've outlined a number of different scenarios. Whether you're young or old, married or
single. have children or not, take a moment to consider how life insurance might fit into your
financial plans.
You're Married
Most families depend on two incomes to make ends meet. If you died suddenly, could your
family maintain their standard of living on your spouse's income alone? Probably not. Life
insurance makes sure your plans for the future don't die when you do.
You're a Single Parent
As a single parent: you're the caregiver, breadwinner, cook, chauffeur, and so much more.
Yet nearly four in ten single parents have no life insurance whatsoever, and many with
coverage say they need more. With so much responsibility resting on your shoulders, you
need to make doubly sure you have enough life insurance to safeguard your children's
financial future.
You're a Stay-At-Home Parent
Just because you don't earn a salary doesn't mean you don't make a financial contribution to
your family. Childcare, transportation, cleaning, cooking and other household activities are
all important tasks, the replacement value of which is often severely underestimated. Some
surveys have estimated the value of these services at over $40,000 per year. Could your
spouse afford to pay someone for these services? With life insurance, your family can afford
to make the choice that best preserves their quality of life.
Your Kids Are Self-supporting and Your Mortgage is Paid Off
As the years go by, you may feel the need for life insurance has passed. But just because the
kids are through college and the mortgage is paid off doesn't mean Social Security and your
savings will take care of whatever lies ahead. If you died today, your spouse will still be
faced with daily living expenses. What if your spouse outlived you by 10, or even 30 years?
Would your financial plan, without life insurance enable your spouse to maintain the
lifestyle you worked so hard to achieve? Would you be able to pass on something to
your children or grandchildren?
You're Retired
Did you know that depending on the size of your estate your heirs could be hit with a large
estate tax payment alter you die (up to 48% of your estate, depending on your state). The
proceeds of a life insurance policy arc payable immediately, allowing heirs to take care of
estate taxes, funeral costs, and other debts without having to hastily liquidate other assets,
often at a fraction of their true value. Life insurance proceeds are also generally income tax
free to a beneficiary and can be arranged to avoid probate. Finally, if your insurance
program is properly structured, proceeds from your life insurance policy won't add to your
estate tax liability.
You're a Small Business Owner
Besides taking care of your family, life insurance can protect your business. What would
happen to your business if you, one of your fellow owners, or perhaps a key employee died
tomorrow? Life insurance can help in a number of ways. For instance a life insurance policy
can be structured to fund a "buy-sell" agreement. This ensures the remaining business
owners have funds to buy the company interests of a dcceased owner at a previously agreed
upon price. That way the owners get the business and the family gets the money. To protect
a business in case of the death of a key employee, "key person insurance" payable to the
company provides the owners with the financial flexibility needed to either hire a
replacement or work out an alternative arrangement.
You're Single
Most single people don't need life insurance because no one depends on them financially.
But there are exceptions. For instance some single people provide financial support for
aging parents or siblings. Others may be carying significant debt they wouldn't want to pass
on to family members who survive them. If you're in such a situation, you should own life
insurance because you wouldn't want your loved ones to be burdened financially in the event
of your premature death.
There are differenct types of insurance for different needs. Learn More >>>
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