Is life insurance right for you?
Recently my mom and I were talking about estate planning and the topic of life insurance came up. As a single person without any dependents, life insurance has not been something that I have contemplated. She and my dad on the other hand, purchased a policy when they had their first child. Their primary concern was making sure that in the event of one or the other’s death, the family would have a financial back up plan.
Here is what I learned about why people might opt for Life Insurance when I did a bit of research.
What is life insurance?
Life Insurance is a product that provides a definite amount of money in case the life insured dies during the term of the policy.
Here are eight very good reasons for purchasing life insurance:
- Paying Off Debts – should a loved one die and there be outstanding balances on loans or credit cards life insurance can help ease the burden that others may have to carry.
- Giving Loved Ones a Financial Future – preparing for future expenses can be important especially when there are children and dependents involved. Life insurance can help fill the income gap in the event of death and could be used to cover day-to-day purchases and living expenses, such as groceries or utilities.
- Leaving an Inheritance – Many people work hard to build up a nest egg for their future. Wanting to pass on as much of one’s hard-earned cash and assets as possible to loved ones or to a charitable cause can be very important to some.
- Providing Extra Support Through Retirement – Life insurance can also fit into retirement planning. Permanent and whole life insurance last the policyholder’s lifetime and often incorporates a “savings” component (as cash value). With such policies, the cash value can be withdrawn or taken as a loan to supplement income during retirement or used for long-term care services.
- Protecting a Business – If a business owner were to pass away suddenly, it helps protect employees and ensure the smooth continuity of the business by providing funds to hire a replacement/cover a smooth wind-down that is favourable to all.
- End-of-Life Expenses – When someone dies, the costs associated with a funeral and burial can be extensive. Life insurance benefits can be used to cover these costs.
- Preparing For the Unexpected – while we don’t know when we will be faced with the end of life, we do know that it is an eventuality. Life insurance can be an important piece of the financial planning puzzle.
- Offering Confidence – making a plan for what will happen after you die can give you peace of mind knowing that your loved ones will be taken care of.
While everyone’s reason for purchasing life insurance may be different, it is important to consider carefully what yours may be. Once you have determined this, searching out the best life insurance product for you is important as there are many types.
With all three of us now grown up, my parents no longer feel they need to have Life insurance to support a young family. They have however, opted to maintain a policy that could be helpful to a charity that is near and dear to their hearts.
~ Ainsley Cunningham
Founder and Project Coordinator, MoneySmart Manitoba
Manager, Education & Communications, Manitoba Financial Services Agency