Overview
Life Insurance serves many purposes. There are actually 73 types of Life Insurance.
Here are just a few examples of uses:
Family Preservations:
Life Insurance’s most important function is to replace earnings that would cease upon the death of the insured. If you die during your earning years, your family would suffer a severe economic loss as a result of losing your current and future income. Without Life Insurance, your family will still face their regular bills, mortgage, outstanding debt, funeral expenses and perhaps savings earmarked for retirement and college. Unless you are very wealthy, continuing to live their current lifestyle will be virtually impossible for your family without life insurance.
Retirement Planning:
Many options available, from Cash Value life insurance insures your life with a side benefit of Cash Value accumulation, which can become sizable and has tremendous tax advantages. Life Insurance can also be used to replace lost retirement income in the event of your death. Done properly, this enables you to take more money from your defined pension plan, while covering the difference for your spouse when you die.
Estate Planning:
Life Insurance can be used to pay potential federal and or state estate taxes. Since estate taxes must be paid in cash, Life Insurance can be a good option to ensure the fulfillment of this obligations without being a burden on your family.
Business:
Life Insurance is a way to protect key employees and the business itself. Employers often purchase Life Insurance on Key Employees to ensure against losses due to their death. Business partners usually purchase policies on each other to insure against financial loss due to the partner’s death. Many businesses use the cash value in Life Insurance to fund executive retirements and bonuses.
Student Loans:
With Student Loan debt is suffocating to young people, and is the #2 debt in the US trailing only home Mortgages. Student loans average $32,781, and an average interest rate of 7% - 8%. If you cosigned on student loans and that person unfortunately dies, you are responsible for their loan repayment. Life insurance for younger individuals is very inexpensive and highly recommended for covering this high expense.
Legacy Planning:
Many people purchase Life Insurance on themselves to leave a legacy to their children, or even to fund grandchildren’s college. Grandparents often purchase Life Insurance policies for their grandchildren. There are many benefits to children who own a Life Insurance policy at a young age. 1. They are able to purchase a relatively large death benefit for a small premium. 2. As they age, many plans allow for increased premium, which results is increased death benefits and potentially large cash value amounts when they are approaching retirement.
Other common Life Insurance uses are:
• Income Replacement
• Personal Debt Repayment
• Business Purposes
• Mortgage or Rent Payment
Many options are available for your specific situation and needs.