Do I Have Enough Life Insurance?

Life Insurance Facts

I often find that individuals of all ages are underinsured with respect to life insurance.  I feel that it is important for anyone over the age of 25 to really understand life insurance not only as a tool to protect loved ones, but also as a sound financial investment and planning vehicle.

Why? Buying life insurance entitles the policyholder to the following benefits:

 

  • Most obviously, you protect your loved ones from income loss and financial catastrophe.  In the event of death, your life insurance policy can serve as replacement for your income so that family and loved ones do not face the loss of assets such as your home.
  • Burial costs, estate planning, attorney and administration fees, debts, and medical expenses can range well into the tens of thousands of dollars.  Many families, especially younger families, do not have the savings to pay these costs.  And even if they do, it is much less stressful if these costs are covered by an insurance policy rather than personal savings.
  • As a result of nearly a decade’s worth of market decline, many financial portfolios are left at just a fraction of the value they once were.  Life insurance offers you the ability to replace and provide an inheritance to your heirs at the time of your death.
  • If you do have substantial assets, a life insurance policy cash payment at the time of death provides security against any potential estate taxes.  This may prevent your heirs from having to sell assets to cover tax liabilities.
  • A life insurance policy can also act as a risk free savings account in some instances, which can be withdrawn or borrowed at the policyholder’s request.  College education, down payment on a home, and unplanned medical expenses are some of the common uses of life insurance cash value.
  • Since you pay for life insurance with money that has already been taxed, the benefit paid to your heirs is tax free!  This is a wonderful advantage for them.
  • Life insurance can also be used as a charitable contribution.

The decision to purchase life insurance is one that should be discussed with a seasoned professional.  A decision you make today could have monumental impact on your life or the life of a loved one 25-30 years from now.  Since the cost of buying a life insurance policy will typically rise as you get older, this is a topic better discussed earlier rather than later.  If you are not properly insured, or if you simply aren’t sure, it makes sense to talk with a licensed insurance agent or financial advisor today.