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Why should I buy life
insurance?
Many financial experts consider life insurance to be
the cornerstone of sound financial planning. It can
be an important tool in the following situations:
1.Replace income for dependents
If people depend on your income, life insurance can
replace that income for them if you die. The most
commonly recognized case of this is parents with
young children. However, it can also apply to
couples in which the survivor would be financially
stricken by the income lost through the death of a
partner, and to dependent adults, such as parents,
siblings or adult children who continue to rely on
you financially. Insurance to replace your income
can be especially useful if the government- or
employer-sponsored benefits of your surviving spouse
or domestic partner will be reduced after your
death.
2.Pay 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.
3.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.
 4.Pay
federal “death” taxes 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 between now and January 1,
2011 will likely lessen the impact of this tax on
some people, but some states are offsetting those
federal decreases with increases in their
state-level “death” taxes.
5.Make significant charitable contributions
By making a charity the beneficiary of your life
insurance, you can make a much larger contribution
than if you donated the cash equivalent of the
policy’s premiums.
6.Create a source of savings
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borrowed or withdrawn on the owner’s request.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 life insurance policy
premiums a high priority, buying a cash-value type
policy can create a kind of “forced” savings plan.
Furthermore, the interest credited is tax deferred
(and tax exempt if the money is paid as a death
claim). |
