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The sudden death of the primary financial provider can be devastating to a family. Besides losing a beloved family member, the fiscal hole left behind can put their entire livelihoods at risk. One way to make sure this doesn’t happen is with life insurance.
But choosing the right type and amount of life insurance is key to a sound financial plan for many people—but how can you determine whether you need it? The Insurance Information Institute (www.iii.org) offers these reasons for obtaining life insurance
– If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially.
– Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
– Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
– Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance.
– Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request.
As with other types of policies, choosing life insurance coverage is a decision for which you should be well-educated. Your best resource for all related questions is your insurance professional. Sit down with them and talk about all of your options. Your family will thank you.