Life insurance is a cornerstone of your financial plan. It’s never really fun to talk about death but your planning is incomplete if life insurance is not discussed, especially when there are people who depend on you financially. Life insurance comes in many different varieties and it’s not one size fits all.
Here are 3 reasons why owning life insurance is good planning:
- It provides income replacement. For most people, their ability to work and earn an income is their most valuable economic asset. If you have dependents, then you need to consider what would happen to them if they could no longer rely on your income.
- It covers debts and long-term obligations. Without life insurance, your loved ones would be burdened with funeral costs, credit card debts, and medical expenses not covered by health insurance using out-of-pocket funds. The policy’s death benefit might also be used to pay off a mortgage, supplement retirement savings, or fund college tuition.
- It can be used for estate planning. The proceeds of a life insurance policy can be earmarked to pay estate taxes so that your heirs will not have to liquidate other assets to do so.