Life insurance can be an important financial planning tool. However, its complexity can leave people confused and even skeptical of its intent. We would like to help clear this confusion by explaining what you need to know about life insurance planning to make a decision that best fits your needs.
You Need Life Insurance if You Have Dependents
If you have dependent children, a spouse/life partner or business partner who would suffer financially if you were no longer alive, you need insurance. But if you are retired, financially sound and have no dependents, you might want to consider using it as a strategic financial tool.
It’s More than Applying a Monetary Value to Your Life
No one can place a value on someone’s life. The purpose of life insurance is to compensate for the expected financial consequences that come with dying, including final expenses, outstanding mortgages and debts, lost income and planned educational expenses. Having life insurance is important for not only the family breadwinner, but also stay-at-home spouses to lessen financial burdens after the loss of a loved one.
There Are Different Types to Consider
Life insurance is available in different types, and not every type may be suited for your individual situation. For example, term life has you pay premiums for a set period, and once that time is over and you’re still alive, the cost to keep the policy can be very expensive. Permanent, whole or universal life policies, while complex, can be effective financial planning tools.
With the right knowledge, life insurance can be an important part of your comprehensive financial plan. You can read more about life insurance planning in this recent Forbes article.