Life insurance is an insurance that pays out a sum of money either on the death of the insured person or after a set period. The cash, thus, helps deal with the adverse financial consequences of the insured's death. Life insurance has many objectives. Its most important role is to replace the earnings that would cease at the death of the insured. Also, life insurance enjoys favorable tax treatment.
To determine whether it makes sense for you to buy life insurance, ask yourself these questions:
If your are the only earning (or even one of the) member of the family, then who would take care of your kids and spouse in case you die tomorrow?
If you own a home, a business, or have personal liabilities, then who would assume your debt in case you die tomorrow?
What would happen to your business if something bad were to happen to you?
Now, if your answer is in affirmative and you think you need life insurance, then you must further ponder to these questions too:
How many people depend on your earning capacity? If you have no one to depend on you then either you do not need any policy. However, policies that cover others risks like accidents, diabilty because of illness or cash assistance for the treatment of life threating disease should be considered.
How much money would your dependents require for living expenses? You can calculate this amount by looking at the total earning you bring regularly to those who depends on you and from this amount you can deduct the worth of property they would inherit from you and any amounts that will be available from public sources or private insurance plans that already provide coverage.
How long would it take for your dependents to be come self-sufficient? In case your kids are in college or would soon come out, then probably they will not require much additional income, however, if they are younger then they might require more.
The main purpose of life insurance is to ensure financial protection to surviving dependents after the death of an insured. You need life insurance because your kids and spouse continue to enjoy a comfortable lifestyle, education, healthy living, and even face unexpected events after you are not there to take care of them.
We are sharing this video from a stalwart of world insurance industry to understand why you need life insurance!
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