Life Insurance
Life Insurance is insurance for you and your family's peace of mind. Life insurance is a policy that people buy from a life insurance company, which can be the basis of protection and financial stability after one's death. Its function is to help beneficiaries financially after the owner of the policy dies.
It can also be a form of savings in the long run if you purchase a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person's pension plan. A person can make contributions to a pension that is funded by a life insurance company.
In addition, you should also make a list of what you feel needs to be
protected in your family's way of life. With a life insurance policy
in place, you can:
· provide security for your family
· protect your home mortgage
· take care of your estate planning needs
· look at other retirement savings/income vehicles
What Is Life Insurance?
Life insurance offers a way to replace the loss of income that occurs when someone dies (usually the person who produces the majority of income in a family situation). It is a contract between you as the insured person and the company that is providing the insurance. If you die while the contract is in force, the insurance company pays a specified sum of money free of income tax — "cash benefits" — to the person or persons you name as beneficiaries.
A good life insurance program does more than just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death —the need for housekeepers and child care, and so on. And these cash benefits should provide for your family's future needs as well, including college education for your children and part or all of your spouse's retirement needs. In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction.
Some types of life insurance — permanent life insurance policies — have a cash value that you can obtain by cashing out the policy or by borrowing against it. Though it can seem attractive, most financial experts agree that this feature should be seen as a secondary purpose of life insurance. Another type of insurance is term life insurance policies are available as well.
Do You Really Need Life Insurance?
If there is someone who would suffer economic hardship if you died, then the answer is yes…. you need life insurance! Families with young children have a clear need for life insurance. If both spouses work, the loss of one income will cause the family immediate economic hardship and make it harder for them to realize future goals, such as paying for the children's' education. But even if one spouse works "inside the home" and doesn't bring in a formal income, his or her death will require the surviving spouse to hire child care, housekeepers and other professionals to help run the household - and that can be a significant new expense.
If you are married without children or single, then you may need life insurance to protect your partner or surviving family members against the costs associated with your death. Funeral expenses, probate and administrative fees, outstanding debts, special obligations to charities, and federal and state taxes are costs that all of us must consider. And, they can add up quickly. Unless you already have sufficient financial resources, your survivors will probably need life insurance to cover these expenses.
What Happens To Your Family If You Don't Have Enough Coverage?
Under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. Depending upon their current financial resources and ability to "get back on their feet" emotionally and financially, your family might be forced to move to a less desirable home or community, abandon education and career plans, reorder family priorities (such as the amount of time spent with the children) and, in general, cut back on the quality of life you have worked hard to achieve.
Your family might even be forced to go into debt simply to pay the expenses, like funeral costs, taxes, and medical bills, that result from your death. A moment's reflection will tell you that the lack of sufficient life insurance coverage when a loved one dies can have devastating consequences for a family...consequences that can last for years.
