An obvious reason for having life insurance is for the death benefit, which provides a replacement of your income at your death. There are also many "living" benefits to owning life insurance. Permanent life insurance (whole life, universal life, etc) build cash values (depending on the premium amount) that are treated in a tax favored manner.
As a solution to a problem that will arise when you die that money can fix. Replace your income, Pay for burial or complete the retirement plan for your spouse.
Or as a solution to an inequity at your death. The house goes to your current spouse and children but your children from a previous marriage are left out. A business is left to one child and not the other.
Love or Legacy. A college education for the grandchildren. A thank you to an organization that helped you when you were down.
Co-Founder, Coastal Financial Partners Group, California
Life insurance offers protection, income replacement, and the chance to leave a legacy. With life insurance, you are protecting the people you care about the most. Life insurance can also protect the business you own. Life insurance can:
Pay burial and other final expenses.
Replace income lost due to the death of a wage earner.
Pay off debt obligations such as a car loan, credit cards, etc.
Pay off or reduce a home mortgage.
Establish a fund to pay for domestic services lost at the death of the primary caregiver.
Create an education fund.
Enhance an estate to provide for children of a prior marriage.
Satisfy divorce related obligations such as alimony or child support.
Create a fund to provide care for a loved one with special needs.
Pay legal and administrative costs incurred at the insured’s death.
Provide a source of liquidity to pay state and/or federal estate taxes.
Mitigate the impact taxes can have on assets owned in trust.
Replace loss due to income tax on Income in Respect of Decedent (IRD) assets such as annuities, IRAs, and qualified plan assets.
Diminish the impact of marital deduction limitations of a surviving resident noncitizen spouse.
Increase the value of transfers of generation-skipping, annual exclusion, and exemption gift amounts.
Leave a charitable legacy.
Replace wealth left to a charity.
Equalize inheritances between business heirs & non-business heirs.
Collateralize a business loan.
Fund a buy-sell agreement.
Stabilize a business at the death of a key employee or owner.
Offset the loss of a key employee (at death) to the business.
Establish a fund to retain key employees (such as stay-bonus, SERP, deferred compensation).
Facilitate an Employee Stock Ownership Plan (ESOP) repurchase obligation.
One of the big ones that people don't think about until it's too late is to help fund your retirement.
When you retire and take your pension options, you have a choice of taking a higher income based on your life only or a smaller income based on your spouse AND your lifetimes. If you have enough permenant life insurance you can take the higher income and use the life insurance to protect the spouse when you die.
Of course there is always final expenses and leaving a tax-free inheritance to family members. Some people use life insurance to leave money to a charity.
There are as many different reasons as there are insurance policies.
Here are just a few reasons why you need life insurance:
You own a home with your partner and have a mortgage. What will happen if you die prematurely and your partner can not afford to make the mortgage payments?
You have student loans, credit card debt or any type of debt.
You have children who depend on your future income for daily living expenses and education.
Funeral and burial expenses
Your family would lose a loved one and have to deal with the pain of the loss. Why leave additional stress and the financial burden on family members to pay off outstanding debts.
Principal Agent, First Insurance Agency Inc, United States
You are simply are getting life insurance because it is the wright thing to do. If you are married with children then you cannot afford not protect your financial obligations to your family and creditors. The only scenario that I can think of where you may not need life insurance is you have at least $1000,000 saved , your home is paid in full, you have no other debts, you have no kids or they are grown and moved out and you have other income then and only then you may be excluded from the life insurance market.
Always consult your financial adviser
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
There are only two reasons to buy life insurance. The first is that you owe money and the lender requires a policy. The second is that you love someone. There are thousands of applications of life insurance but this is the bottom line. If it isn’t required or you don’t love someone there isn’t any reason to buy life insurance. If your death, premature or in old age, doesn’t make a ripple on a pond, you don’t need life insurance. However, if your death is going to cause a loss to someone you love buy all the life insurance that you can afford!
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As a solution to a problem that will arise when you die that money can fix. Replace your income, Pay for burial or complete the retirement plan for your spouse.
Or as a solution to an inequity at your death. The house goes to your current spouse and children but your children from a previous marriage are left out. A business is left to one child and not the other.
Love or Legacy. A college education for the grandchildren. A thank you to an organization that helped you when you were down.
The list is endless.
Pay burial and other final expenses.
Replace income lost due to the death of a wage earner.
Pay off debt obligations such as a car loan, credit cards, etc.
Pay off or reduce a home mortgage.
Establish a fund to pay for domestic services lost at the death of the primary caregiver.
Create an education fund.
Enhance an estate to provide for children of a prior marriage.
Satisfy divorce related obligations such as alimony or child support.
Create a fund to provide care for a loved one with special needs.
Pay legal and administrative costs incurred at the insured’s death.
Provide a source of liquidity to pay state and/or federal estate taxes.
Mitigate the impact taxes can have on assets owned in trust.
Replace loss due to income tax on Income in Respect of Decedent (IRD) assets such as annuities, IRAs, and qualified plan assets.
Diminish the impact of marital deduction limitations of a surviving resident noncitizen spouse.
Increase the value of transfers of generation-skipping, annual exclusion, and exemption gift amounts.
Leave a charitable legacy.
Replace wealth left to a charity.
Equalize inheritances between business heirs & non-business heirs.
Collateralize a business loan.
Fund a buy-sell agreement.
Stabilize a business at the death of a key employee or owner.
Offset the loss of a key employee (at death) to the business.
Establish a fund to retain key employees (such as stay-bonus, SERP, deferred compensation).
Facilitate an Employee Stock Ownership Plan (ESOP) repurchase obligation.
When you retire and take your pension options, you have a choice of taking a higher income based on your life only or a smaller income based on your spouse AND your lifetimes. If you have enough permenant life insurance you can take the higher income and use the life insurance to protect the spouse when you die.
Of course there is always final expenses and leaving a tax-free inheritance to family members. Some people use life insurance to leave money to a charity.
There are as many different reasons as there are insurance policies.
You own a home with your partner and have a mortgage. What will happen if you die prematurely and your partner can not afford to make the mortgage payments?
You have student loans, credit card debt or any type of debt.
You have children who depend on your future income for daily living expenses and education.
Funeral and burial expenses
Your family would lose a loved one and have to deal with the pain of the loss. Why leave additional stress and the financial burden on family members to pay off outstanding debts.
Always consult your financial adviser