About 84% of Americans believe that it is important to have life insurance. But only 41% have any. That’s quite a disparity!
Where do you fall in this equation? Do you have the life insurance that you need?
We’re assuming here that you have already taken a big first step and are working on your estate planning. If so, you need to understand the role of life insurance.
Life Insurance Helps Care For Your Kids
Perhaps one of the most important roles of life insurance is ensuring that your kids or other dependents will be taken care of if something happens to you or your spouse. Depending on where you are at in life, your death could spell financial disaster for your dependents.
A life insurance policy helps address these potential disasters by providing necessary and timely funds for various reasons and uses. For instance, your dependents might use life insurance benefits in place of your lost wages, to pay for college, or to pay off debts.
Life insurance is also especially useful if you have a special needs child. This child may need financial support for many, many years after your death. We all wonder what will happen to our children, but with special needs children, you mainly want to make sure they are set up to be taken care of as they age.
Usually, these insurance benefits are paid out in a lump sum. But you may have concerns about the fiscal responsibility of the person receiving them. In this case, you can set it up so that the benefits purchase an annuity that would pay out in installments over time.
Life Insurance Can Help Keep Your Estate Intact
As the old saying goes, nothing is certain but death and taxes. And death comes with its hearty share of taxes.
A small estate is defined as those valuing less than $2 million per person. In these cases, death taxes are not too much of a concern as they will not be very high; however, if your estate is more substantial, life insurance plays a valuable role in ensuring there is money to cover any death taxes that may be levied against your estate.
Taxes and debts can erode the value of your estate drastically. Life insurance helps ensure that there is money to cover these unexpected expenses while keeping your estate intact for your heirs to enjoy.
Life Insurance Could Help Cover Probate Fees and Other Costs
Depending on the size of your estate and how complex it is, there can be other costs associated with passing it on after your death. One of the most common costs is probate fees. Probate is the legal process of validating your will and executing it according to your wishes.
There also may be estate administration costs. Plus, the inevitable costs associated with your burial and funeral. Again, life insurance benefits could conceivably cover all of these.