When we get older, got married, started a family, and began a business, we realized that life insurance was indispensable and fundamental to a sound financial plan. Over the years, life insurance will give us peace of mind knowing that money would be available to protect our family and estate in a number of ways, including:
1. To Pay Final Expenses
The cost of a funeral and burial can easily run into the tens of thousands of dollars, and we don’t want my wife, parents, or children to suffer financially in addition to emotionally at our death.
2. To Cover Children’s Expenses
Like most parents, we want to be sure our kids are well taken care of and can afford a quality college education. For this reason, additional coverage is absolutely essential while our kids are still at home.
3. To Replace the Spouse’s Income
If our spouse had passed away while the kids were young, we would’ve needed to replace her income, which was essential to our lifestyle. We also would’ve needed to hire help for domestic tasks we’d shared like cleaning the house, laundry, cooking, helping with schoolwork, and carting kids to doctor’s visits.
4. To Pay Off Debts
In addition to providing income to cover everyday living expenses, our family would need insurance to cover debts like the mortgage so they wouldn’t have to sell the house to stay solvent.
5. To Buy a Business Partner’s Shares
If we’re involved in a business partnership, we need insurance on our partner’s life. The reason is so if he dies, we will have enough cash to buy his interest from his heirs and pay his share of the company’s obligations without having to sell the company itself. He has the same needs (due to the risk that we might die), and he simultaneously purchased insurance on our life.
6. To Pay Off Estate Taxes
Estate taxes can be steep, so having insurance in place to pay them is essential to avoid jeopardizing assets or funds built for retirement. Use of insurance for this purpose is most common in large estates and uses permanent (rather than term) insurance to ensure that coverage remains until the end of life.