Why Should I Buy Life Insurance?

Many financial experts consider a term life insurance or whole life insurance policy to be the cornerstone of sound financial planning. A solid life insurance policy can be used to:

1. Help replace your income and provide financial security for your dependents.
   If you are the primary earner in your household and people depend on your income, life insurance can help replace that income if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, disabled relatives, siblings or adult children who continue to rely on you financially.

2. Help pay final expenses such as your funeral and burial costs, probate and other estate administration costs, debts, and medical expenses not covered by health insurance.

3. Create an inheritance for your heirs by buying a life insurance policy and naming them as beneficiaries.

4. Help pay federal and state inheritance and estate taxes. These are generally due within nine months of death and could absorb nearly half of your assets before a single dollar goes to your heirs. Life insurance benefits can pay estate taxes and settlement costs so that your heirs will not have to liquidate other assets or take a smaller inheritance. You can be secure in the knowledge that your loved ones will receive the legacy you have spent a lifetime creating, not just a piece of it.

5. Make significant charitable contributions. By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy's premiums.

6. Create a source of savings. Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner's request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of "forced" savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).

This article adapted from information provided by the Insurance Information Institute .