Why Do I Need Life Insurance?September 18, 2014
Let’s start off with this: Not everyone needs life insurance.
But for a large percentage of Americans, life insurance can provide short-term financial relief, long-term stability, and even a little extra peace of mind for policy holders.
The popular punch line is that life insurance should actually be called “death insurance” – because there is no payoff for policyholders while they’re alive. But by scanning the reasons why you might consider life insurance, you’ll quickly see there is a benefit for both policyholders and beneficiaries now – and later.
Here are several reasons to consider life insurance:
Life insurance, and funeral and burial expenses
The median cost of a funeral today is about $7,000 – and with the exception of those who may be managing terminal illnesses or who have lived extra-long lives, few people have stashed away the cash to cover this expense. The weight of this financial burden can also be even heavier for those who are grieving over a loss. The good news is that when you name one or more beneficiaries to your life insurance policy, these people will have almost immediate access to these funds to put them toward funeral and burial expenses.
Other short-term financial obligations
Managing an estate can be very complicated as laws vary from state to state and a number of parties may be involved. Understand that any savings accounts solely in your name and proceeds from the sale of valuable property you planned to transfer through a will likely be inaccessible to family and other beneficiaries until your estate has been reconciled. (Allowances can be granted for short-term financial needs, but it’s best not to count on this.) Thus, mortgage and car payments, credit card bills, and other obligations will need to be settled through funds that family, friends and would-be beneficiaries have immediate access to. Often times, life insurance payouts fill a critical need here, giving these parties a source of ready cash so that they don’t need to stress about finances during what will already be a difficult time.
Life insurance and long-term financial management
Does your family depend on the income you provide – or would your passing place a burden on that would compel your loved ones to spend money in new ways, such as for child care? Are your family and any other beneficiaries prepared to meet their financial obligations six months, a year and even five years down the road? If the answer is no, as it is for a large number of Americans, life insurance payouts can provide the cushion necessary to subsidize your family’s income and help them maintain the standard of living they’ve come to know. From recurring college tuition costs to health insurance payments, these ongoing costs can be much easier to manage with the right life insurance policy.
Peace of mind through life insurance
It’s always a bit awkward to discuss the payoff of your own life insurance policy. But rest assured, there is a benefit for you above and beyond providing for those you leave behind. If you ever worry about what will happen once you’re gone or stress about how your family will provide for themselves economically and otherwise in your absence, holding a life insurance policy will do wonders for your own peace of mind.
Life insurance isn’t for everyone. But if you have loved ones who depend on you for financial and other support today or tomorrow, it’s certainly strongly worth your consideration.