If you are young and single, you might not think that life insurance is something that you need. But as you start to grow your family and build your wealth, the importance of having this type of coverage will become clear.
Having an investment in a policy available for your loved ones should anything happen to you can provide security at difficult times if they have the means to settle your financial obligations.
In this article, we will look at fifteen reasons why life insurance is important. You may find that you want to discuss additional coverage with your insurance professional if one or more of these points apply to you and/or your family members.
15 Benefits Of Life Insurance For Everyone
People will always need life insurance because it provides financial protection for dependents in case the breadwinner of the family passes away and leaves all expenses behind.
The following reasons explain why life insurance is important:
1. Life Insurance Helps Secure Your Assets
When a breadwinner of a family dies, the household goes through huge financial problems. If death is unexpected, a policy can help cover the costs associated with final expenses.
Life insurance can help provide immediate funds to pay outstanding debt and other costs associated with your passing. If you have children, it can also provide for their education including college expenses if the provider will allow the policy’s cash value to be accessed for this purpose.
2. Life Insurance Provides Income Protection
Some life insurance can protect you against lost income due to death or illness. So, even if you are not working at the moment, your family is still able to receive a payment each month.
This ensures that they have enough money to live on until they can find another form of employment or decide if they want to open up their own business venture.
3. Life Insurance Provides Estate Protection
A life insurance policy is the only way that your heirs will be able to access funds directly from your estate without paying any taxes on them. Depending the size of your estate, you can designate different portions of it to go to each beneficiary so they all share equally in receiving funds.
4. Life Insurance Makes Transferring Assets To Loved Ones Easier
Another benefit is that life insurance can help transfer your assets to loved ones without having to go through probate. Proceeds from the policy are received tax-free.
So anyone who inherits money this way pays taxes on it only if they sell it or if there is a big difference between its purchase price and market value when they receive it.
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5. Life Insurance Provides Retirement Savings Protection
When you are younger, life insurance can be used as a method of saving for retirement through your employer’s plan or other types of qualified savings vehicles that are offered by the IRS.
You will not have to pay income tax on the contributions until you withdraw the funds which could allow them to grow at a fast rate before you reach retirement age. On average, this amount could be six times larger than what you put in due to compound interest over time.
6. Life Insurance Helps With Child Education Costs
When you begin planning for your child’s education through a savings plan, one of the best ways to ensure they receive enough money is by investing in a permanent life insurance policy that provides them with funds at regular intervals over several years.
This way you know how much money is available and you can continue to pay the premiums as they go through school so there is enough money for them to enter adulthood without having to worry about it.
7. Life Insurance Can Give Child Financial Protection
If you already have young children then you need life insurance as soon as possible. Even though they are too young to understand the implications.
If something happens to both parents at once then it is better for them not to be worried about losing their home or other possessions. Your children are beneficiaries in case anything ever happens to you before they become adults.
8. Life Insurance Is A Hedge Against Inflation
Life insurance is an important form of protection because it takes care of expenses. Since many families have two wage earners it also provides another benefit called purchasing power protection. It means each parent has more bargaining power when purchasing items.
With more bargaining power, your family can purchase more items for less money each year since there are two parents instead of one. This also goes back to inflation which causes prices to increase if there is not enough money to pay them with.
9. Life Insurance Is An Investment
Even though life insurance premiums are not typically considered an investment, they are. If you take out a policy while employed then it will be offered at a much lower rate.
By making regular payments into this account over many years, your family members will be able to access the funds at regular intervals as long as they keep paying for this type of protection.
10. Life Insurance Can Pay Off Debt
If you have credit card debt then consider what might happen if both parents die at the same time? You can pay off these debts before passing away by using life insurance benefits. This way your family won’t have to pay off you.
11. Life Insurance Can Provide College Education Protection
College education protection cannot be taken lightly because costs keep increasing every year so by the time your children get ready to enter college, it will take both parents working to pay tuition costs.
12. Life Insurance Can Cover Out of Pocket Costs
Would your family be able to deal with the added expense that’s associated with burying you? Many people are surprised by how much it costs to bury someone. This is why life insurance remains important because it can help cover funeral expenses in the event of a death.
If you knew beforehand, then perhaps you would have chosen a policy with funeral coverage included at no extra cost.
13. Life Insurance Can Support Your Business
If you own a business and this company provides employment for numerous people, then what happens if both owners die unexpectedly? Will the business close because it cannot operate without management?
Life insurance can provide children with a lump sum of money which can be used to buy their parent’s share of the business and keep it running smoothly without disruption.
14. Life Insurance Can Be An Income Replacement
Income replacement is important because there may come a time when your spouse will stop working in order to take care of the kids. What happens if both parents become ill and there’s no replacement?
Would you rather make up for this loss now by buying life insurance or would you prefer that your family deal with the consequences.
15. Life Insurance Provides Disability Protection
A disability can strike at any time so many people are forced to miss work because they’re too sick or unable to perform their daily duties. What happens if you suffer an injury that prevents you from working for months or even years?
Life insurance benefits can be used to cover your living expenses so you won’t have to worry about going into debt just to pay your bills.
The Importance Of Life Insurance – Conclusion
Life insurance is important because it provides financial security for your loved ones if one of you passes away unexpectedly. Since this type of protection is not typically considered an investment, the benefits are more valuable than anything that savings bonds or stock dividends can provide.
By taking advantage of these benefits now you won’t have any regrets later on in life.
References
- https://www.protective.com/learn/how-your-life-insurance-policy-can-ensure-a-brighter-future-for-your-child
- https://www.investopedia.com/articles/wealth-management/122915/why-own-life-insurance-qualified-retirement-plan.asp
- https://www.protective.com/learn/will-my-life-insurance-cover-a-long-term-disability
