Why should people buy life insurance policy? Benefits and Importance

Submitted by frndzzz on Fri, 04/02/2021 - 18:43

Why should you buy a life insurance policy?

If you have ever wondered why you need a life insurance policy, this write-up would help you in finding the answer.

Life insurance has long been regarded as an important financial tool to help one with estate planning. It is particularly important for people who have young children, dependent spouses, and disabled adults to take care of. It would help the family in replacing the loss of income after the death of the bread earner.

It would also provide the family with immediate cash which can be used to meet the final financial obligation of the deceased. However, to determine whether or not you are the right candidate for life policy you may ask yourself the following questions.

Do you need to provide for your family?

If you are the only earning member of your family, you might have a life policy in place which would replace your income in the event of your premature demise.

Do you have children who would go to college?

Your child’s dream to attain college mustn’t be interrupted by your early demise. Hence, if you have children to attain college, you are the right candidate for life insurance.

You can determine the coverage you would need by multiplying the cost of education of your child with the years it would take him to attain self-reliance.

Do you have debt?

If you don’t want your bereaving family to struggle through making payments towards your debts, consider buying a life policy.

Similarly, to keep the roof above their head you must make arrangements which would pay off the mortgage after you.

Have you made arrangements for final expenses?

Meeting the final expenses would be the last thing that a bereaving family should worry about. It can be expensive and may cause the family to run into debt if no arrangement is made for it beforehand. A life policy can help in such situations.

Do you want to pass on a legacy to your heirs?

Since death benefits on life policies are always tax-free (if you have a named beneficiary other than your estate), it can be used to pass on assets to your heirs without attracting tax consequences.

It is important to assess both your short-term and long-term goals to determine your requirement for life insurance. A perfect coverage planning would take care of both the immediate and long-term financial needs of your family in the event of your demise.