Life insurance, by nature, is designed to provide financial support after the death of the policyholder. There are different types of life insurance, including whole life, term, variable and variations of all three. Obviously, no one can prevent people from dying, but life insurance lowers the economic burden caused by death. Individuals pay regular premiums to the insurance company, which contracts to pay a larger sum to the beneficiaries upon the policyholder's death. Always evaluate the financial needs of the beneficiaries before purchasing a life insurance policy.
Expense of Dying
After a person dies, the family is often left with medical bills and funeral expenses. The combination of the two can leave the survivors many thousands of dollars in debt if there aren't adequate funds to cover the costs. Life insurance policies should be enough to pay these expenses.
Family Expenses
After the death of one of the family breadwinners, the financial gap may be huge. Some families are sent into a downward spiral of bills, debt and the inability to maintain the lifestyle they've worked so hard to attain. Providing adequate life insurance may prevent the family from being financially distraught. It allows the survivors in the family to grieve without the added burden of worrying about paying the bills.
Providing for Family Future
Most families have goals and objectives for the future. Perhaps the dream has been to have a family business, a new home or education for the children. Without one of the income earners, these dreams may be dashed if there isn't adequate insurance to cover the cost.
Providing Services
Even if one of the adults in the home is a stay-at-home parent, there are financial reasons for her to have life insurance. Consider the cost of hiring someone to do the cooking, chauffeuring, cleaning, budgeting and other jobs the stay-at-home parent does.
Cover Additional Expenses
When someone dies unexpectedly, she may leave behind debt that can't be covered without her income. If there are debts or taxes that need to be paid, life insurance will prevent having to sell the assets to cover the costs. Many people buy life insurance so they have the freedom to divide the assets in an equitable way, without worrying about the estate taxes cutting into the actual estate.
Other Purposes of Life Insurance
Life insurance can cover other necessities, depending on the type of policy. Business partners may carry life insurance on each other to protect their interests and assets if one of them dies. Certain types of insurance also pay interest on the premiums that can be used for retirement income.
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