When planning for the future, there is perhaps no single product more important than life insurance. Whether it’s to cover current debts and liabilities, or to provide surviving loved ones with a source of supplemental income, life insurance is a source of sanity and fiscal stability that helps millions of families stay afloat each year after a loved one has unexpectedly passed away.
Estate Taxes and Planning: When Life Insurance Becomes Essential
The usefulness of life insurance doesn’t become obvious to many people until they begin to plan their estate and they learn about the potential taxes, expenses, and fees that will be incurred by their spouse, children, and others, after they have passed away. Life insurance helps to offset or eliminate those costs by using its payout to the beneficiary as a main source of income and inheritance. The amount of the benefit paid out to the life insurance beneficiary can help offset estate planning fees, asset distribution fees, and more.
Staying Afloat With Mortgage Payments
Life insurance is absolutely critical after the purchase of a home, as the potential payout of an insurance policy can help cover part or all of the outstanding balance on a home mortgage product. This is one of the main reasons that people purchase life insurance, as the loss of an income can lead to great financial difficulty when making monthly mortgage payments in addition to insurance payments, utility bills, and other living expenses.
Head of Household Income Replacement
In many households, one spouse earns significantly more income than the other and is often considered the head of household. If that person dies unexpectedly, their income will vanish along with their physical presence. Even with supplemental social security benefits and potential pension payouts, there can be a significant loss of income that will negatively affect both a spouse and any dependents.
Life insurance helps to nullify this concern by acting as a significant income replacement upon the death of the head of household. This allows for a quicker rebound financially, and allows both a surviving spouse and any dependents to live comfortably while they plan a burial service, look for alternative employment, and word on filling in the gaps left behind by their loved one’s death.
Burial Expenses are Covered
A burial is no cheap affair, with the average cost of a service, a coffin, and a wake running into the thousands of dollars for most families. In the event of an unexpected death, those costs are hardly calculated into the regular budget and they can be hard to afford without a life insurance policy. With a proper policy, burial costs are covered and they will present no significant financial burden to surviving loved ones.
Payment of Debts After Death
Whether it’s a short term debt such as, a student loan or car loan, or a long term liability like a mortgage or numerous other sources of debt, a life insurance policy pays down the debt on behalf of the person who took out the policy in the first place. There are various life insurance terms available in order to buy the right policy for your situation. Those who are looking for coverage for the repayment of student or car loan may be able to save money by only purchasing a 10 year term life insurance policy. Where as a person purchasing insurance for the repayment of a mortgage would need a long term policy, such as 20 or 30 years. Without such a policy, the surviving spouse or dependents would have to either pay the debt or pursue costly court procedures to have the debt cancelled. This is a significant headache that is easily avoided with life insurance.
Of course, life insurance exists primarily to eliminate the headaches associated with an untimely death. From cancellation of debts to compensation for funeral expenses and more, a life insurance policy is easily the most financially responsible, and financially beneficial decision that a person can make during adulthood.
