Why do I need life insurance?
The most important reason to buy life insurance is to have enough money to provide for dependents such as young children, non-working spouses or elderly parents, should you die and be no longer able to provide for them.
Many financial experts also consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
- To replace income for dependents: If family members depend on your income, life insurance can replace that income for them if you die.
- Pay funeral 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.
- 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.
- 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savings: Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner's request.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 premiums a high priority, buying a cash-value type policy can create a kind of "forced" savings plan.