Why should I take life insurance ?
Friday, October 31st, 2008Times have changed and the reasons why people buy life insurance have grown from the original purpose. Let’s have a look at the causes:
Income Replacement
Life insurance is used to protect the premature death of a spouse or parent so that the loss of income is not devastating to the family.
Payment of Outstanding Debts
Life insurance can as well be useful to protect mortgages, car payments and credit cards, etc.
Final Expenses
The benefits obtained from life insurance can cover funeral and other administrative expenses, etc.
Education Funding
The death of a parent may mean that the quality of education, intended for a child, may be out of reach.
Emergency Fund
Any adjustment expenses, such as time off work, medical and counselling expenses can be covered by life insurance.
Special Needs Child
The use of life insurance provides a guarantee that the funds will be there to care for those special needs.
Business Continuation
To provide funding to assist in orderly transfer of business ownership, in the case of owner’s death, life insurance guarantees that the business is transferred as intended.
Business Insurance
Key Person, Executive Bonus, Split Dollar and Deferred Compensation funded with life insurance.
Estate Taxes
Under current tax law life insurance can provide liquidity at death to pre-fund the estate tax liability. This may not be necessary if the Estate Tax is permanently replaced.
Charitable Giving
A charitable minded client may leave a gift to a favourite organisation, without significantly reducing the size of the estate by using the death benefit to replace the value of the property gifted to heirs.
Equalising Inheritance
Life insurance provides additional liquidity to assist in providing each child with equal shares of their parents’ assets.
Income in Respect of a Decedent
People die owning assets that have not yet been taxed; these taxes then become the obligation of the beneficiary. Life insurance provides liquidity to assist in the payment of these taxes.
Second Marriages
There can be conflict when a parent with children remarries. Life insurance provides the children with enough financial security.