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Why is Life Insurance Important?
Whether you're married with kids, have a partner or other relatives who depend on you financially, having life insurance can be important. The most basic reason many people buy life insurance is to help provide financial protection for their loved ones in case the worst-case scenario occurs: death. Life insurance provides money, or what's known as a death benefit, to your chosen beneficiary after you pass on.
Can Help to Financially Protect Your Family
Life insurance is meant to help protect your family's financial future. Even if you have savings, it's unlikely that it would be enough to cover your family's expenses for several years or even decades if something happens to you unexpectedly.
Can Replace Lost Income
Whether you have a 9-to-5, are self-employed, or own a small business, your income might cover a portion or even all of your family's daily needs.
Housing, food, utilities, clothing, car maintenance and health care premiums are likely all part of your monthly budget, and even without your income, your family will still need to cover these expenses. The death benefit from a life insurance policy can help provide the funds your family may need to help cover these expenses.
Can Help Your Loved Ones Pay Off Debt
Certain types of debt don't go away when you die, which means your loved ones may have to use money from your estate or sell off other assets to cover them. This could leave less money to pay for expenses.
Life insurance can help your loved ones pay for any debt you leave behind, including credit card debt, business debt, personal and/or educational loans and mortgage debt.
At a time when your loved ones are already dealing with your loss, life insurance can help ease some of the financial burdens they may experience after your passing.
Can Cover Funeral Expenses
Funerals can be expensive. The national median cost of a funeral and burial expenses is $9,800. Dealing with this financial stress can add to the emotional stress your family might experience. Your family could use some of the death benefit from your life insurance policy to help pay for these costs. To do this, the beneficiary of the policy could direct some of the death benefit to the funeral home, or they can pay out-of-pocket and use the death benefit as a reimbursement for these expenses.
Can Help to Pay for Future Education Expenses
If you have children, life insurance can help your family pay for future childcare and education expenses, especially for college. Even if you've already started contributing to a 529 college savings plan, the death benefit from a life insurance policy can provide additional money to help cover your children's education.
Understanding life insurance and how much coverage you may need can help when making long-term financial plans. Making plans to help support your family's financial stability in the event that you pass could help to mitigate the stress and burden of an already difficult time. Depending on your financial goals and needs, life insurance could be an important part of this plan.