Life insurance provides you with two major benefits. First, it protects loved ones against the financial consequences of your death. Second, it offers living benefits.
The financial effects of death can be devastating. When you lose a spouse, parent, child, sibling or grandparent, the emotional turmoil can be extremely severe. Yet, the financial repercussions can be even more overwhelming than the loss itself. With no life insurance, surviving family members are often thrust into a position of acute financial hardship. Not only are they are left dealing with the loss of a future income, but they must also handle the immediate outlay of finances demanded by the death and burial expenses that have been unexpectedly generated.
If you look at the mortality statistics, you will see that a significant number of people die each year, long before they achieve their normal life expectancy. If the deceased is a breadwinner in a family, that premature death can have tragic consequences, on many levels. Not only are survivors trying to deal with deep personal grief and loss, but they are also facing grave financial concerns. They can no longer rely on that breadwinner’s salary to meet the daily living expenses.
Funeral costs are not the only immediate expenses that crop up. Other expenses could include such things as executor’s fees and estate administration. Outstanding debts like promissory notes, car loans, mortgages, the balance on credit cards and medical expenses must be paid. Not to mention there are death taxes, and state and federal taxes.
The future security of loved ones is something else to consider. Living expenses, mortgage payments, and children to raise and educate are important considerations. It can be an overwhelming burden, and it really does not matter what financial obligations are left behind. There is only one thing that can resolve them, and that is money. If you want to ensure your family does not deal with the financial devastation a premature death can produce, you need to arrange to provide sufficient monies to cover their needs.
There may well be a time during which the surviving spouse cannot work, and for some, there is the survivor’s blackout period to be concerned with, as it is during this time social security stops paying the surviving spouse, because there are no longer dependent children. You may also want to ensure there are retirement funds available for a surviving spouse. Really, life insurance is a type of estate building, and it can create an immediate estate, at a time when it is needed most.
Living benefits are another advantage of life insurance. Some permanent policies offer a cash benefit in addition to the death settlement. Prior to the insured’s death, this cash value belongs to the policyholder, and can be used by them. Some permanent policies actually permit withdrawals from the cash benefit, and this money is yours to use as you choose. Loans can also be taken out from the insurance company, and the policy’s cash value would then be used as collateral.
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