While this isn't always a comfortable topic to discuss, we want to be real and honest with you in order to help you understand where there may be a need. Below we have listed several reasons to have a life insurance policy. Not all of those reasons to get life insurance may apply to you and we respect and honor that. We work 1-on-1 with our clients so we can understand their specific needs and we tailor the solutions to meet those needs.
Reasons to Have Life Insurance
The most common reason people think about life insurance is to either pay for burial/funeral expenses or to take care of their family when they are gone. However, life insurance is much more versatile. While both of those are important things to think about, there many other reasons to have life insurance.
Final Expenses
This is the most common reason for purchasing life insurance. A final expense policy is usually a small life insurance policy that will cover the expenses of a funeral, memorial service, or any other expenses when you pass so your family doesn't have to pay out of pocket to take care of everything while mourning their loss. While small and inexpensive, this can be a very big deal for your friends and family.
Paying off debt or replacing income
The next most important reason to have life insurance is in order to take care of the hole left behind. It is a good idea to have enough life insurance to cover any debt you have as well as enough to provide replacement for your income in the event of your passing. This helps provide for your family even after you are gone and will help give them time to mourn before having to worry about ways to replace your income.
Single Income Households
Some families have only one spouse who works while the other stays home to take care of the children. While the stay-at-home parent doesn't always make an income, it is still a good idea to get life insurance on them because they fill a vital role in your family. A life insurance policy here can help provide for the care of the family and the household.
Leaving a Legacy
The next thing most people think about with life insurance is the idea of leaving a legacy or inheritance. Life insurance can be used to leave behind resources and wealth to your children and grandchildren. This gives many people the peace of mind that their family will be provided for in their absence. You may also want to leave behind money for a charity or organization close to your heart. Both of these are great uses for a life insurance policy.
Access to Cash and Extra Income, Especially for Retirement
Going through life, you may come across some added expenses like paying for your kids' college, buying a home, or even needing more money in retirement than you expected.
Over time, many permanent life insurance policies offer you the potential to earn cash value. This cash value can be used any way you want, whether a down-payment on a home, paying for college tuition, or even if you get sick and can't work. Many retirement income strategies will use life insurance as part of the portfolio.
Save on Taxes
Nobody likes paying taxes. But taxes are a fact of life. Many of us don’t want to pay any more in taxes than we absolutely have to. Life insurance offers tax benefits. Both term and permanent policies will provide your beneficiaries with a typically tax-free death benefit when you die, per IRC §101(a).
While you’re living, you can take income tax-free loans from the cash value of your permanent policy.*
*You can access your cash value through loans and withdrawals. In general, loans are charged interest; they are usually not taxable. Withdrawals are taxable only when you take more money out of the policy than you’ve paid in premiums. Loans and withdrawals may reduce or eliminate the death benefit payable to your beneficiaries.