Why Purchase
Life Insurance?
We’ve all heard about
the importance of having life
insurance, but is it really
necessary? Usually, the answer is
“yes,” but it depends on your
specific situation. If you have a
family who relies on your income,
then it is imperative to have life
insurance protection. If you’re
single and have no major assets to
protect, then you may not need
coverage.
In the event of your
untimely death, your beneficiaries
can use funds from a life insurance
policy for funeral and burial
expenses, probate, estate taxes, day
care, and any number of everyday
expenses. Funds can be used to pay
for your children’s education and
take care of debts or a mortgage
that hasn’t been paid off. Life
insurance funds can also be added to
your spouse’s retirement savings.
If your dependents
will not require the proceeds from a
life insurance policy for these
types of expenses, you may wish to
name a favorite charity as the
beneficiary of your policy.
Whole life insurance
can also be used as a source of cash
in the event that you need to access
the funds during your lifetime. Many
types of permanent life insurance
build cash value that can be
borrowed from or withdrawn at the
policyowner’s request. Of course,
withdrawals or loans that are not
repaid will reduce the policy’s cash
value and death benefit.
When considering what
type of insurance to purchase and
how much you need, ask yourself what
would happen to your family without
you and what type of legacy you
would like to leave behind. Do you
want to ensure that your children’s
college expenses will be taken care
of in your absence? Would you like
to leave a sizable donation to your
favorite charity? Do you want to
ensure that the funds will be
sufficient to pay off the mortgage
as well as achieve other goals? Life
insurance may be able to help you
meet these objectives and give you
the peace of mind that your family
will be taken care of financially.
The cost and
availability of life insurance
depend on factors such as age,
health, and the type and amount of
insurance purchased. As with most
financial decisions, there are
expenses associated with the
purchase of life insurance. Policies
commonly have mortality and expense
charges. In addition, if a policy is
surrendered prematurely, there may
be surrender charges and income tax
implications.
If you are
considering the purchase of life
insurance, consult a professional to
explore your options.