Why People Buy Life Insurance

Buying life insurance protects your dependents after your death.

Accidents happen. Life insurance is a way to prepare for the unexpected. Life insurance helps prepare your loved ones to deal with the consequences of your death. It can also be a savings vehicle for the future with policies that have cash value. When others rely on you for income, buying life insurance is a wise decision.

Income Replacement

You may be worth more money than you think to your dependents.

When you die, who will you leave behind? If your answer was a spouse or children, then you need to consider how they will survive without your income. If you are the primary breadwinner in the household, then you need to determine your expenses and how long they will need income before they can change circumstances—get a smaller house, find a job or go back to school to get training for one.

Medical Bills and Funeral Expenses

Medical and funeral costs can add up.

For those who have suffered physically before dying, insurance payments may be a welcome relief to those you leave behind. Depending on the reason for your death and how long you have suffered, the cost of medical bills could be overwhelming. Add to that the price of a funeral. Life insurance will ease the process of planning one by making it possible without taking on debt.

Mortgage Protection

Mortgage protection insurance pays off your home in case of death.

The loved ones you leave behind will need a place to live. One thing people buy insurance for is to pay off the mortgage on their house so their dependents will not have to move. In planning for the amount of life insurance you need, you should consider how much it would cost to pay off your house so that concern can be erased from the minds of your loved ones. There are even specific insurance policies that are structured to be mortgage protection in case of death.

Estate or Death Taxes

Did you know your loved ones will have to pay federal and state taxes on your belongings? In an article entitled “Why Should I Buy Life Insurance” the Insurance Information Institute points out that there can be federal and state estate taxes owed when you die. If your family does not have the money to pay these taxes, they will have to sell belongings, incur debt or take a smaller inheritance.

Cash Savings

The Insurance Information Institute in the article “Why Should I Buy Life Insurance” also suggests life insurance that creates cash value, one reason being that interest is tax deferred and tax exempt if the money is paid as a death claim. If you do not die, the cash can be borrowed or withdrawn at the owner’s request. Some people buy these types of insurance plans for children when they’re young and use them for the purchase of a car or college expenses when they mature.

References

• Insurance Information Institute: Why Should I Buy Life Insurance?