No one really wants to think about life insurance. But when others depend on you financially, this is a topic that cannot be avoided! The what-ifs and life's unknowns can be pretty overwhelming, but it doesn't have to be. In this blog post, you will learn about eight motivations behind purchasing a life insurance policy. Now, depending on what kind of policy you choose there are different benefits. We've got some interesting facts about life insurance that will change the way you think about this important financial product.
If you would like to learn more about the different types of life insurance, we have a post about that as well.
Help pay off your debts and expenses:
The last thing you want is for your mortgage or debts to pass over to your partner or children if something were to happen. By having a life insurance policy, it can pay off whatever remaining debt you have. It can also pay off estate taxes and mortgages. This could save your family home to be able to keep it for future generations.
Provide for your children/Income replacement:
Think about all of the things your income covers. If your salary suddenly wasn’t there, your family would need a way to pay the monthly bills. Since life insurance is typically paid out a lot quicker than settling an estate (which can take months after death to complete), it can also provide support so your family isn’t burdened financially.
Let's face it; No one likes taxes! Working so hard only to lose a nice amount of your salary towards taxes is no fun. With most life insurance policies the proceeds received by a beneficiary from the insured are not considered taxable income. At this point, are you still asking yourself "Why do I need life insurance"!?
Peace of mind & Security:
Peace of mind is something we all want! The daily stresses of life keep coming especially in this fast-paced world. Why not give yourself one less thing to worry and think about?! Knowing that you are prepared and that your family is secure in case of a tragic life event, will help you sleep better at night.
Leave an inheritance:
Not all of us have something to leave over for our children. In a study done by Nerdwallet (among millennials) one of the most selected reasons for purchasing life insurance was to leave an inheritance. The payout goes directly to the beneficiaries and is tax-free. A universal life plan would make the most sense if you would like to leave an inheritance since it will last until you reach a nice ripe old age. In a way, this is like making investments with life insurance for your loved ones.
Buy business partner's shares:
For those entrepreneurs with business partners, it would be a good idea to have something in place to keep the business in the family, etc. If one of the partners dies, a buy-sell agreement allows the surviving partner to buy out the deceased business owner's share of the business.
Guaranteed cash value/build cash value:
With a cash-value life insurance policy, as you pay your premiums a portion goes towards insuring your life, while the other portion goes towards the cash value. That cash value will keep growing as long as you keep your plan and pay your premium.
Provide a source of cash during your lifetime:
If something were to happen where you need income during your lifetime, a loan can be taken out against your life insurance policy. Getting that loan on life insurance will provide that much-needed income in the time of need.
If you were to choose one main reason that trumps and includes all the reasons at the same time, it would be peace of mind. Being prepared and knowing that your family, business, and/or future are secure gives you the security you need to sleep easy at night. No one can predict the future but you sure can try to make sure that you are prepared!