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Life Insurance: Do I need life insurance?Here's a piece of advice your insurance agent may not share with you: Not everyone needs life insurance. The basic purpose of life insurance is to offer financial protection to your loved ones in the event of your untimely death. So you only need life insurance if someone is relying on your income and would be affected financial when you are not around. Here are some of the questions you should ask yourself: Could your spouse continue to pay the mortgage or raise the children? Would there be enough money to pay your debts, or to pay for college for your children? If you’re divorced, how can you be sure that child support obligations will be fulfilled? If you’re single, with no dependents, you may not want life insurance at all. Some employees get some life insurance through work. Usually it equals a year or two of your annual salary. If you earn $30,000 per year, you might get a life insurance policy worth $30,000 to $60,000. Typically, your insurance at work will provide for a decent burial. And your personal debts will not be the responsibility of your loved ones. A life insurance policy could fund a bequest to a charity. But unless you support your parents, they’d have a difficult time deciding what to do with the proceeds of a policy on their child’s life. $60,000 might sound like a lot, but if you have children and a stay-at-home spouse, it won't last long--even if your spouse also gets your monthly (or lump sum) pension and social security. Life insurance is a benefit that you hope
you won't need (at least not soon anyway) but you would be foolish to do
without. Remember that life insurance is usually the major source of cash for
beneficiaries. In most states, proceeds are exempt from the claims of the
deceased's creditors and it is usually not subject to probate. Because
beneficiaries avoid probate and receive the face value of the policy tax-free,
make sure you name contingent beneficiaries. If not, and your primary
beneficiary predeceases you, the insurance proceeds of your policy upon your
death will become part of your will and will end up in probate court. Also
naming your young children as beneficiaries may not always be a smart move
because insurance company will not pay proceeds to a minor until a court
approved guardian is established. How much life insurance
is enough?
Next -->> Different types of life insurance |
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