Life Insurance: Do I really Need It?
July 20th, 2015 by admin
Most people get the urge to buy life insurance after some major life event sparks a new sense of responsibility. A wedding, the birth of a baby, and the purchase of a house are three common examples of these kinds of events. It only makes sense for a spouse, parents, and homeowners to make sure that they can take care of their obligations even if they should unexpectedly pass away.
However, not everybody who considers buying life insurance has just experienced a major life event. In order to decide if you really need life insurance, it’s important to think about why you think you want to buy coverage and what you intend to use your policy for.
What is Life Insurance For?
There are all kinds of life insurance products on the market. These are the two basic types:
- Term: A straight term policy only provides a death benefit for the length of the term.
- Permanent: Whole and universal are examples of permanent life insurance, and they can grow a cash value and stay in force for a lifetime.
The primary purpose of either term or permanent life insurance is to provide a death benefit. Some products do more because they include living benefits, a cash value, tax advantages, and other features. They might be promoted and used as ways to also grow an asset or cover some incident besides a death, but again, the primary purpose of anything that is legally defined as life insurance is to provide cash to beneficiaries if the insured person passes away.
Different life insurance products might provide additional benefits that could help increase your financial security. However, there could be other ways to provide those benefits outside of life insurance. For example, if you are considering a permanent life insurance policy to grow a cash value for your retirement, you might also compare life insurance to an annuity.
Do Your Beneficiaries Need Your Life Insurance?
You really purchase life insurance for your beneficiaries and not yourself. The beneficiaries are the people or entities who are designated on the policy as the ones who will receive payments after you die. Typically, beneficiaries are spouses, children, or other close family members. However, a beneficiary could even be a business partner, company, or favorite charity. Again, there are many different ways to use life insurance. This circles back to the question of what you believe you want to use your life insurance for. If you know your goals, you can figure out if life insurance is the right way to achieve them.
When Do You Need Life Insurance?
The old saying goes that very few widows, widowers, or orphans ever regretted having a breadwinner or caretaker buy too much life insurance. If you have dependents that rely upon your income or efforts, and you aren’t very wealthy, life insurance can provide an affordable way to give your family security. In this case, it might be fair to say that you really do need life insurance. If you should die, your family can use the death benefit to pay bills and stay in their home.
If you are lucky enough to already have great sums of wealth to pass on to your dependents, you might not need life insurance. However, you may also find that using life insurance instead of cash offers some tax benefits for your estate. You might not require life insurance, but it still could be the best solution. This is the topic of a conversation you might have with your life insurance agent.