Why you should buy life insurance
As Atlanta 12-string guitar master Blind Willie McTell once sang, “You might as well get ready, cause you’ve got to die.” Christian overtones aside, life insurance salesmen would have loved Blind Willie. While it may seem morbid or unnecessary, the truth is that setting up a life insurance policy is a novel idea, as part of a sound financial plan to protect your family and estate. Here are some of the top reasons why you should buy life insurance, how much and which type.
Why you should buy life insurance reason No. 1 – To pay for a funeral
If you’re one of those who believe in having a grand funeral and riding out the years in a casket that prevents your remains from feeding the earth, then sure, go ahead and use your life insurance money to pay for a $10,000 funeral. At least the policy takes the burden off your family, who will be suffering enough as it is after your death.
Why you should buy life insurance reason No. 2 – To take care of the kids
The cost of a good college education arguably outstrips the usefulness of some degrees. Yet it remains difficult to deny that having a college education is important. As such, a life insurance fund can be just what puts little Johnny through college. Shame you had to die for it to happen.
Why you should buy life insurance reason No. 3 – To replace the lost income
Americans have become such dedicated consumers that two or more salaries are now necessary for a household to function. In the event that a key wage-earner ceases to produce on account of a non-life situation, having a life insurance policy can close the gap nicely. Sometimes, it can even hire the household help necessary to pick up the slack with chores, if the surviving spouse is less inclined to homemaking.
Why you should buy life insurance reason No. 4 – Pay off mounting debts
If you’re in deep to the sharks – or even worse, to the credit card companies – you’ll need to pay down the debt before they strip your bones. Paying off a mortgage is a great thing to do in this scenario, because the death references make it so very apro pos. For mortgage, in archaic French, translates roughly as “pledge until death.”
Why you should buy life insurance reason No. 5 – To buy out a business partner
It isn’t uncommon for a business partner to take out a life insurance policy on their counterpart. In the event of their death, the life insurance money would ideally enable the surviving partner to buy their shares so that the company doesn’t have to be sold.
Why you should buy life insurance reason No. 6 – Pay that ugly estate tax
We know that fluctuating laws regarding estate taxes have at times led aging patriarchs and matriarchs to consider ending it all for the piglets farther down the trough. While offing oneself is not something Match Financial advises, the truth is that estate taxes can be a bitch. Having life insurance money to absorb the shock can help a great deal with large estates via permanent (instead of term) insurance.
How much life insurance is right – and what kind?
How much death benefit do you need in a life insurance policy? Enough to replace the rest-of-life lost income after taxes is one sure yardstick. This enables a family to soldier on with their lifestyle, minus the deceased, of course. If there are other special circumstances that you know will require excess cash, account for that in your policy. Of course, your budget for premiums must be considered from the start.
The next big question is whether to go whole life or term on your life insurance. With the former, sponsors invest part of your premiums so that annual costs don’t rise as you age. Overall, premiums will be higher from beginning to end. Term insurance is more stripped down, with no excess premiums invested, as well as no guarantees beyond end-of-term, which ranges from a little as one year to as many as 30 years. Annual premiums are less than whole term, but they will also tend to go up with age.