Why buy life insurance?
Young people tend to underestimate the importance of life insurance: to them, the possibility of dying or becoming disabled seems like a very distant event. The truth is that accidents do happen and can happen at any point in life. And if you have a family, the financial consequences they will suffer in the event of your premature death, can be very grave.
Here is a list of the most common reasons why people buy life insurance:
- Payment of a mortgage and/or other outstanding debts: if you don't own your home, car, etc., you are most likely contributing to the monthly payments. If you are not there to do that, your family runs the risk of losing their home.
- Payment of loans or credit cards: financial obligations of any sort that haven't been paid off are not effaced after you die. The creditors will contact your family which might be forced into bankruptcy unless they have the money to pay off your debts.
- Maintaining the family's lifestyle: even if you don't have any outstanding debts, your family has got used to a certain lifestyle that was in part provided for by your income.
- Funeral and burial expenses: these services can cost a considerable amount of money, reaching $15,000 in some states.
- Education fund: in the case of your premature death, who is to provide for the education of your children?
- Special needs children: life insurance guarantees that part of the proceeds will be used to care for members of the family with special needs.
- Estate taxes: life insurance can pre-fund the estate tax obligations.
- Business continuation: if the owner of the business dies, there needs to be a guarantee that the company will be transferred as intended.
As you can see, there are many important reasons why one needs life insurance. So if you have a family, you should choose an appropriate life insurance policy plan to cater for their needs in case you die prematurely.
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