Life insurance. Thinking about it reminds many of us of both of our mortality and the need to provide for our loved ones. Yet despite the relatively high level of public awareness regarding the benefits of having life insurance, research by LIMRA (Life Insurance and Marketing Association) shows that approximately 95 million Americans —especially those in their 20s and 30s—do not have such a policy and millions more who do have life insurance do not have enough.
Since September is Life Insurance Awareness Month (an annual observance pioneered by the non-profit organization Life Happens) let’s examine the question: Does everyone really need life insurance?
While the answer is not black and white, not everyone needs life insurance. If you don’t have anyone financially dependent on your income, then you may not need it. However, it is worth reviewing the following life-stage guidelines from LIMRA to see if obtaining this type of insurance coverage is something you want to consider, given your life circumstances. If you already have life insurance, this information can be useful to help you determine if your existing coverage needs to be updated.
If You Are a Small-Business Owner
Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, or a key employee died tomorrow? Life insurance can help in a number of ways. If you have co-owners of your business, a life insurance policy can be structured to fund a buy-sell agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets a monetary payment. To protect a business in case of the death of a key employee, key person insurance, payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or to work out an alternative arrangement.
If You Are Single
Most single people without dependents don’t need life insurance, but there are some important exceptions. For instance, some single people provide financial support for aging parents or a sibling with special needs. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them, or want to pay for final funeral and/or burial expenses. Insurability is another reason to consider life insurance when you’re single. If you’re young, healthy, and have a good family health history, your insurability is at its peak and you should be able to get very affordable rates on a life insurance policy.
If You Are Married
Many people mistakenly believe that unless they have children, they don’t need life insurance. But what if you or your spouse died tomorrow? Even with your surviving spouse’s income, would that be enough to pay off debts like credit card balances and car loans, let alone cover the monthly housing payments and utility bills? If not, having a life insurance policy can protect you financially if you are faced with a loss of a spouse.
If You Are Married with Children
Most families depend on two incomes to make ends meet. If you died suddenly, could your family continue to meet their financial obligations? Could your family continue their standard of living on your spouse’s income alone? Would their plans for the future—like attending college still be possible? Life insurance makes sure that your family’s plans for the future don’t die when you do.
If You Are a Single Parent
Single parents play a critical role in their children’s lives—and in providing for them financially. Yet, according to LIMRA, nearly four in 10 single parents have no life insurance, and many with coverage say they need more than they have. With so much responsibility in your hands, having enough life insurance to safeguard your children’s financial future is especially important.
If You Are a Stay-At-Home Parent
Stay-at-home parents may not earn a traditional salary, but that doesn’t mean they don’t contribute financially to their families. Childcare, transportation, cleaning, cooking, and other household activities are all important tasks, the replacement value of which is often severely underestimated. With life insurance for a stay-at-home parent, the quality of life for the family that remains after their death can be preserved.
If You Have Grown Children
Yay! Your kids are through college and the mortgage is paid off—but this doesn’t necessarily mean that you no longer need life insurance. If you died today, your spouse will still be faced with daily living expenses. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you’ve worked so hard to achieve now and into retirement? If not, it is worth maintaining—or obtaining—a life insurance policy.
If You Are Retired
Depending on the size of your estate, your heirs could be hit with an estate-tax payment of up to 45 percent after you die. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of these taxes, funeral costs and other debts without having to hastily liquidate other assets. Life insurance proceeds are also generally income tax free and won’t add to your estate tax liability, if properly structured.
As you can see, life insurance can provide important financial security at every stage of life. So ask yourself, “Do I really need life insurance?” Chances are you do! If you already have life insurance but you are not sure if you have adequate coverage to protect your family, now is an ideal time to check with your representative. Please contact us with any questions you may have about your life insurance needs.
Ann Arbor: 734.971.1000
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