Ah yes, life insurance, the great paradox of financial products. The only product that you will ever purchase that you hope you will never use. Easily the least exciting thing that I discuss with clients as the conversation typically relates to spending money and dying. Not the most uplifting topics, eh? But here’s the thing: life insurance is often vital to the success of your well-crafted financial plan. It’s a key component in making a contingency plan for your finances in the event of your unexpected demise. Do I have your attention now? Great, let’s discuss three potential reasons to buy personal life insurance coverage.
- Support the people you care about
This is the most obvious reason to buy life insurance and the most common. If you are the primary income earner in your home, your untimely death could have major consequences. Consider the bills that would need to be paid, outstanding debts, and daily living expenses that your income supports. If you have children, consider additional expenses like childcare and education costs. There are a number of ways to calculate how much life insurance you need to support these income needs (which I will explain in next week’s blog) but for now take a look at your personal situation. Are there people who you love that depend on you to provide for them? You may want to consider life insurance.
- Plan for the future
Even if you do not have an immediate need for life insurance there may still be a reason to consider purchasing it now. If you are young and newly married, it may make sense to purchase coverage now in order to lock in your rates at your current age and health status. For example, perhaps you and your spouse are in your early 30s and hoping to have children in the near future. It may make sense to purchase life insurance now while you are both young and healthy and will be paying, hypothetically, lower premiums. Another reason to purchase life insurance for the future is in the case of preexisting health conditions. In certain situations, you may have a health condition that is not expected to improve or perhaps even worsen. In this situation it may make sense to purchase insurance now in order to preserve your future insurability.
- Leave a legacy
Sometimes life insurance is purchased to create an estate that can be passed on to your survivors. In this situation, life insurance makes funds immediately available to pay off outstanding debts, taxes, final expenses and other costs. This could give you the potential to leave behind an inheritance for your family, create an endowment fund for a cause you care about, or donate to another charitable cause.
This is not meant to be an exhaustive list of reasons to purchase life insurance and doesn’t even touch on the business purposes for life insurance. However, hopefully this is useful in helping you understand why life insurance exists in the first place. I hope to further expound on this topic in future. Now for this week’s song! It’s a perfect song to ring in the Summer beach season!