Why Buy Life Insurance?
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.
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.
The main reason for buying life insurance on anyone's life is to replace income lost or pay for expenses caused by the death of the insured person. If your child dies, there's no lost income, but there will be funeral, burial and related expenses that could run to thousands of dollars, which might cause a financial hardship to the parents of the deceased child.
Still another reason for buying life insurance on a child's life is part of a program to teach the child financial responsibility. Typically the insurance is whole life insurance, ownership of which is transferred to the child when he or she turns 21.
There are term policies, or pure insurance coverage. And there are the many variants of whole life, which combine an investment product with pure term insurance and build cash value.
Agents sell the vast majority of life policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies.
Try to make sure you only buy a policy from an insurance company that's in great financial shape, so it doesn't go out of business before you do. Before you purchase a policy, ask the agent - or check the insurer's Web site - for the company's financial strength rating, a letter grade from major rating services. Stick with the top grades.
If you're wondering whether or not you should buy life insurance, ask yourself this one question: "Would my death leave anyone in a financial bind?" If you answer "yes", it may be time to get serious about shopping for life insurance. Life insurance can offer peace of mind, ensuring that your debts or loved ones will be taken care of in the event of your death. But before you buy it, you need to ask yourself if you'll qualify, and whether you should purchase term or permanent life insurance.
The rule of thumb is once you become a parent, any adult in your house earning income should have life-insurance coverage that will last until your youngest child completes college. If you have large financial obligations such as high credit-card debt or a mortgage, you could use life insurance to ensure that debt is covered. Because life-insurance death benefits are exempt from federal taxation, many financial planners often use clients' life-insurance benefits to help pay for the estate taxes generated upon the death of a loved one.
Think you don’t need life insurance if you don’t have kids? Think again. It may seem like an unnecessary expense. But there are many reasons to have life insurance, even if you’re not supporting a family.
Whether you live by yourself, with a spouse or significant other, you may want to buy life insurance as mortgage protection. Think about it − you don’t want the person you live with to be homeless if you die unexpectedly, do you?
Life insurance also offers a tax advantage that isn’t available with other financial products. Death benefits are income tax free.
We offer the following information to businesses and individual customers:
- Aarp Life Insurance
- No Medical Life Insurance
- Over 50s Life Insurance
- Taxes On Life Insurance
- Whole Of Life Insurance
