subject: The Benefits Of Owning Life Insurance [print this page] If you are being dissuaded from owning a life insurance policy by a friend, family member or well-wisher who is skeptical about the necessity for life insurance or perhaps likens it to gambling, here is a quick look at a number of reasons to own a life insurance policy on yourself despite the naysayers.
Income replacement
A life insurance policy is usually bought to replace any incoming paychecks that stop when the insured person dies. This is why it is so important to research and study exactly how many years of income replacement your family would need before being able to steady financial affairs on their own. Some prefer large blanket amounts of coverage because they don't mind paying large premiums while others may need to assess how much cover is really needed in order to pay more affordable life insurance prices.
Debt repayment
Life insurance proceeds can pay for outstanding debts like the mortgage, business loans or college private loans. Some may insist that living in the same house that was shared with the deceased spouse is emotionally draining and not feasible (with maintenance issues that come with keeping a large home of your own), this differs from family to family. For some, ensuring that the mortgage is paid off so surviving family members can have a roof over their head is important for many reasons. For instance, a stay-at-home mom may have little to no work experience and may find it hard getting a job, taking care of young children and paying the mortgage. Having a home fully paid off in this case would be a huge relief.
Medical Bills
In the case of the insured having left huge outstanding medical bills (examples of this occurrence include fatal accidents or terminal illnesses discovered in their final stages), life insurance proceeds can help pay for these expenses. Many family savings' have been squeezed to the last drop in order to pay for sudden medical expenditures that even health insurance would not take care of. To use this benefit, ask your life insurance carrier about the Living Benefits or Accelerated Death Benefits rider on your policy, which is activated once a doctor certifies that your life expectancy after diagnosis of an illness is 12 months or less. Some carriers allow payments for up to 24 months.
Estate Tax
When a person dies, all their belongings, investments and assets are collectively reviewed for the purposes of estate tax if the combined amount of these belongings exceeds a certain amount. Congress stipulates this amount which is at $5 million in 2012, and it is slated to change in 2013 legislation. In some cases, prized real estate or other fixed assets in the family will need to be sold or liquidated in order to pay the federal government its dues. Life insurance proceeds can help fill in this gap. Consult an estate planning lawyer for more details.
Retirement fund
A whole or permanent life policy can serve as a retirement nest egg for a surviving spouse or even the individual who owns the policy, provided the cash value has been allowed to build over a decent amount of time. Some whole life insurance policies even allow a long term care rider which will pay for long term care costs like nursing homes, assisted living care or an in-house nurse.
College Tuition
Some parents take our larger term life insurance policies on themselves to ensure that their children will have enough funds to pay for rising college tuition costs. Even though term life insurance is for short term periods, it works well for parents who have a college savings fund in place that can pay even when term life insurance cover runs out.
Inheritance Planning
For individuals or families that have amassed wealth and hope to pass it on to their children and grandchildren, a life insurance policy can help pay for estate taxes and even add to the inheritance amount. This works well for those that have eaten through their savings for retirement care costs but still wish to leave behind gifts for surviving family members.
Helps reduce post event stress, depression and an abject sense of loss
The biggest relief a life insurance policy provides is assuring that the lack of money does not add to the grief and loss one experiences at the time of a loved one's death. Instead of scrambling around to arrange money for funeral expenses, or to pay off creditors banging at the door, or even to pay for daily expenses like food and the utility bills, the payout from a policy can allow loved ones to settle into a new family paradigm, heal from their loss and take things one day at a time.
This is why, no matter how small your policy is, having some sort of life insurance is always better than nothing. Remember, it's not about you. Buying a policy is a selfless act where you put the needs of others before yourself. And sometimes, even in the face of death and loss, nothing can be more rewarding.
by: Pat Cassidy
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