8 Reasons to Buy Life Insurance

Life insurance is considered by many financial experts to be a key component of sound financial planning. Below are 8 reasons to buy life insurance:

1. Mortgage Protection

   The first reason to buy term life insurance is to provide mortgage protection. The proceeds from the insurance policy can be used to repay your outstanding mortgage balance, ensuring your family can remain in the family home if you are no longer there to pay the mortgage. The simplest way to do this is to select a term equivalent to the number of years remaining on your mortgage, although it is also possible to obtain declining balance life insurance with a diminishing payout that is designed to match the reduction in your outstanding mortgage balance over time.

2. Income Replacement for Your Dependents

   Perhaps the most common reason to obtain term life insurance is to provide income replacement for your dependents if you die unexpectedly. Life insurance enables your spouse, children, or other dependents to maintain the lifestyle to which they are accustomed in the absence of your income. It can also be used to repay any existing financial obligations or debts you might leave behind. In addition, after your death, your spouse may receive reduced government or employer-sponsored benefits, therefore life insurance can be used to provide the necessary supplement to this reduced income.

3. Ensure Goals are Met, Such as College Tuition Funding

   If you intend to help pay for your child's college education, term life insurance provides a safety net in case you are not there to provide the necessary funding for this important goal. You don't want your child to miss out on a good education because they simply can't afford it. Just select a policy with a term that ends just after your child or children are expected to complete their studies.

4. Pay Final Expenses

   Many people underestimate or do not expect to be faced with significant funeral and other final expenses. Burial costs and costs associated with the administration of your estate can be a large financial burden on your surviving family at the worst possible time. Life insurance can take care of these costs and eliminate this worry.

5. Create an Inheritance for Your Heirs

   We would all like to provide a nice inheritance to pass on to our heirs. Even if you haven't saved any assets you can create an inheritance for them by purchasing life insurance and naming your heirs as beneficiaries. You need to ensure your policy remains current and does not expire prior to your death.

6. Cover Federal and State "Death" Taxes

   In order to pay estate taxes, your estate might have to liquidate other assets, which might even include the family home. Life insurance can be used to cover these taxes and ensure your heirs can hold on to assets they do not want to sell.

7. Make a Significant Charitable Contribution

   Making a charity the beneficiary of a life insurance policy enables you to make a much more significant charitable contribution than donating the cash equivalent of the policy premiums.

8. Protect a Business

   As a business owner, you should consider taking out a life insurance policy on yourself and other business partners or key persons involved in the business. This helps mitigate the loss of expertise and ensures the business can keep operating and maintain its credit ratings until a replacement can be found. A business owner might also consider obtaining a life insurance policy to offset estate taxes so that the family is not forced to quickly sell the family business to meet these expenses.