You probably don't sit around with your friends and discuss life insurance, but it's an important part of your financial portfolio. Learn why as you decide whether life insurance is right for you.
What is Life Insurance?
A life insurance policy provides a financial payout to your survivors if you die. It's a valuable tool in your estate planning portfolio since it protects your loved ones from financial stress or devastation after your death.
What Does Life Insurance Cover?
Purchase a life insurance policy, and your surviving beneficiary can use the money for a variety of purposes.
1. Cover funeral expenses. The average funeral cost $7,045 in 2012, according to the National Funeral Directors Association. Reduce your survivors' financial strain with life insurance funds that cover this necessary expense.
2. Replace income. Because your survivors depend on your income for basic living expenses, they're at risk of losing their home, vehicle and other assets after your death. Your life insurance policy can provide your survivors with financial stability.
3. Repay debt. Student loans, credit cards, vehicles, mortgages and other debts can burden your survivors. Purchase life insurance, and the policy can repay debt and reduce the financial strain your survivors feel.
4. Pay estate taxes. After your death, your survivors will owe estate taxes on any assets you own. Instead of affecting their budget, they can use your life insurance funds to pay this expense.
5. Save for the future. Fund your children's college education, help your partner start a business or support your parents' retirement. Your life insurance policy can fund these and other future plans.
Who Needs Life Insurance?
Many people think life insurance is necessary only for parents of young children. After all, those survivors could face severe financial strain without adequate resources to provide for their basic needs. In reality, anyone who's single, married, young or old benefits from the financial peace of mind a life insurance policy provides.
How Much Life Insurance do you Need?
Everyone's life insurance needs differ, so you'll want to evaluate your finances and situation as you decide how much life insurance to purchase. Consider what your life insurance funds will cover, how much money your survivors need to live comfortably and the premium amount you can afford. Your insurance agent can work through these details with you to ensure you have adequate protection that secures your loved ones' futures and gives you peace of mind.