Financial planning is a big part of being a successful, responsible adult. Alongside financial planning comes estate planning and making arrangements for financial obligations that will continue even after your death, which is why having a life insurance policy is so important.
If it will cause financial hardship on somebody if you die, an important part of your estate planning should include life insurance. Meant to lessen the financial sting on grieving families, life insurance, also known as the death benefit, helps replace your income when you pass away.
A life insurance policy typically pays out enough money to replace your income for several months and help your loved ones meet important needs such as the cost of memorial services, daily living expenses, and college funding if you have children.
Who, exactly, needs life insurance, anyway? Almost every adult with an income, property, or debt can benefit from having it, but if you fit in one of the below categories, it’s important that you shop around to get the best policy so there’s extra security, just in case.
You'll need life insurance:
- If you’re married. Many married couples mistakenly believe that as long as they don’t have children, life insurance is an expense they can skip, but it’s really not that simple. Ask yourself, if one of you died tomorrow, would the person who survives really have enough money to pay off debts like credit card balances and the mortgage? Would they be given adequate space to grieve and heal without worrying about financial obligations? Couples often split costs of everything from dinner to loan payments. So what will happen if a double income is cut in half?
- If you have minor children. Whether you’re a single parent or a married couple, what will happen to your children if you unexpectedly pass away? Is there money squirreled away for college? Will your family be able to continue paying rent in your absence? If you’re a stay at home parent, the housework and other tasks you do are highly valued. You aren’t replaceable, but leaving behind some extra financial support can help your family adjust their lifestyle to your absence.
- If you have others who depend on you. If you are care taking for an elderly relative or help care for a family member with a disability, a life insurance policy can give you the peace of mind that there will be continuum of care for your loved one, no matter what happens. This can also be true if you simply help contribute to your family’s finances and worry if they’ll be okay without you.
- If you own a business. Life insurance can help take care of your family, but it can also help protect your business. In fact, life insurance can be structured to help business partners by funding a buy-sell agreement that would allow the remaining partners to buy the interests of a deceased owner at a previously agreed-upon price. Key person insurance, payable to the company, also covers a business in the case of the loss of a key employee. The money goes to finding a replacement or otherwise make up for the loss of your valuable skills or job function.
Life insurance adds stability and security to what is often considered a crisis for your loved ones and is an essential part of financial planning. Coping with the death of a loved one is never easy, but life insurance makes the entire financial burden a lot easier to bear.
If you need help with financial planning, including planning your estate or managing other assets, please contact us.
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