Fewer than two thirds of adults have a life insurance policy. Are you among those who think you don’t need one? Think again! There are some very important benefits of life insurance, particularly if you have dependents such as children or you hold any assets with mortgage debts. The main reason people take out a life insurance policy is to provide financial security for their families in the event of their deaths, and while no one likes to think about this inevitable eventuality, preparing for the worst is crucial to the wellbeing of your family.
1. Protect Your Family from Debt
If you’re the main earner in your family, you probably already have one or more major financial responsibilities, such as having to pay back a mortgage on your home. When someone dies, any debts they have typically pass over to the next of kin, which can present a major problem if they don’t earn enough money to take care of the payments. In the worst-case scenario, a family might even have their house repossessed by the lender if they can no longer pay the mortgage due to the main earner in the family passing away.
2. Take Care of Your Business
Not all life insurance policies cater only to individuals, and there are those designed to take care of people who operate or their own businesses or have other major financial assets and obligations. For example, the death of a business owner or senior partner can cause disaster to any business if they are not adequately protected by a suitable insurance policy. Life insurance for business people can provide short-term financial support to ensure the business survives long enough for things to return to normal.
3. Cover Funeral Expenses
Funerals can be enormously expensive as such that they can add serious financial issues to already emotional and stressful times. In the US, for example, the average traditional funeral costs upwards of $7,000, and a lot of people simply don’t have that sort of money at their disposal. Many life insurance policies provide financial coverage for funerals in the event of untimely deaths. At the very least, most life insurance plans provide families with a lump sum when the policy holder dies, allowing them to fund the funeral from this money.
4. Supplement Your Retirement
Some life insurance plans allow you to supplement your retirement to the extent that they can pay out on a regular basis until the day you die. While so-called term-life policies end as soon as you retire, permanent life insurance policies last the rest of your life, thus allowing policy holders to withdraw money from the cash accumulated over the years from premium payments. While life insurance is not intended to be a vehicle for investment, it can help you increase the money you have available for your retirement. However, you’ll want to prioritize other retirement plans first.
5. Set a Good Example
Life insurance simply makes sense financially, particularly if you have a family who relies on you. Protecting your financial assets and the future of your family will help to set a good example to others members of your family, and taking out a life insurance policy is a great place to start. It can also reflect well on your finances when it comes to your credit score, thus indirectly increasing your chances of borrowing money in the future. In other words, life insurance helps to show others, including potential lenders, that you are financially responsible.
Above all, having an appropriate life insurance policy offers peace of mind for both you and your family. While no amount of money can replace you, any dependents you might have will need financial protection should the worst happen. Life insurance policies provide precisely that protection to the extent that it will help your family survive any financial uncertainties in the event of your passing away.