If you have ever thought about starting a life insurance policy, there are many smart reasons to do so. Depending on who is in your life and what kind of safety net you want to have if something happens to you, life insurance can be beneficial in multiple scenarios.
- Protect What You Care About
Although some people may encourage you to turn to life insurance as a way to bank on yourself and leverage cash for self-financing purposes, many others use it as a form of protection for families, businesses and others that depend on them. You can also use life insurance to protect your business.
- Replace Income
How much money does your job contribute to rent or the mortgage, childcare, car payments or health care? One way that life insurance plays the role of being a safety net is by replacing income if something happens to you and you cannot work. This will ensure that your loved ones will still be able to pay the bills if you can no longer support them.
- Grow Cash Value
Going back to the concept of banking on yourself, life insurance can also act as a form of self-financing. Over time, your life insurance policy will build cash value, and this can help you meet numerous financial goals. Whether you want to supplement retirement income, fund a child or grandchild’s education, pay off your home or establish an emergency fund, the cash value can be useful.
- Benefit From Tax-Free Incentive
Another perk of life insurance is the tax-free incentive. With this, your beneficiaries will be able to receive monetary life insurance benefits that are entirely free from taxation. This will give them more resources to take care of what matters at home.
- Cover End-of-Life Expenses
When someone dies, often finances are an additional burden that families must deal with during an already difficult time. In the United States, the median cost of a funeral is around $7,900. With a life insurance policy, you do not have to worry about your loved ones going through this.
- Supplement Retirement Savings
There are also situations when having life insurance is beneficial before something happens to you. For example, if you purchase a whole, universal or variable life insurance policy, there is a solid chance that it will accumulate significant cash value if you have it for a long time. If this occurs, life insurance can also act as a smart way to supplement your retirement savings or make a down payment on a car or home in your younger years.
- Pay for Future Education Expenses
Paying for college in a two-parent household can be expensive, but if your children face a one-parent home if something happens to you, it can be even worse. Every year, the cost of higher education increases. Another benefit of taking out a life insurance policy is that doing so can help you pay for educational expenses in the future if something happens to you. In addition to covering the costs of college, your loved ones can also use it to cover child care expenses for younger children.
- Pay Off Debt
Did you know that your surviving loved ones can also use your life insurance benefits to help pay off debt if something happens to you? Depending on the type of debt you have, it may or may not go away after you die. If you have significant debts, your family may have to use your estate or other assets to pay them off. This is another situation when having a life insurance policy can be useful.
Having a solid life insurance policy can be beneficial for multiple reasons. This is especially true if you have children or other dependents at home who rely on your financial support. If you are unsure whether you need life insurance, consider the items on this list to help you decide.