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Why Buy Life Insurance?
By: Stuart Simpson
Love. Yes, that’s right. Love for your spouse, children, family, or even your
school. This insurance provides financial protection for your family and friends
when you die. There are basically two types of life insurance – Term and
Permanent.
Term life insurance provides insurance for a specific amount of time. Like, for
one year. You can usually renew annually, and this is called “Annual Renewal
Term”. This works until about age 80. Level Term offers you a level premium for
a fixed amount of years. You lock in a rate for 20 years. Then you have to get a
new rate or new policy.
Permanent Insurance is also called whole life, universal life, etc. This form of
life insurance also has a built in savings plan. You get a death benefit with a
cash value savings plan attached. Of course, this plan is more expensive, but
allows for some financial latitude.
You may be wondering why you would need insurance and what could you do with the
proceeds if your spouse or loved one died. Here are some ideas that would help
with the financial loss.
1. Income. Even if your spouse works, loosing one salary could be devastating.
2. Housing. The money could be used for rent or payoff the mortgage. Your spouse
may not want to stay in the house, but it will give some options for them.
3. Debt. Reducing debt due to the loss can help the surviving spouse continue to
be financially solvent. This will help your spouse survive on one income.
4. Pay Expenses. Funeral and hospital bills can be tremendous. The average
funeral is $6,000.
5. Social Security. Its there, but it takes a while for it to kick in so to
speak. Better cover yourself until that first check arrives.
6. Education. Think about the high costs of education and the burden that would
be with only one income. Account for an educational nest egg to give your kids a
head start.
7. Charity. If you don’t have anyone, this would be a good option. Also, you can
get a tax deduction for the rest of your estate if you give some money away. In
other words, give a chunk away and you might be able to keep some assets to give
to your family.
8. Taxes. Two things certain. Death and Taxes. You may have to pay taxes on your
401k and other assets even though you are dead. If you don’t get these assets
before you die, then the person receiving the benefit must pay the tax.
These last two items are a bit tricky and would require expert assistance from a
tax attorney or estate attorney.
Think about your family and decide what type of life insurance would protect
them the best. Let me know if you can think of other helpful information on what
to do with life insurance proceeds.
About the Author:
Stuart Simpson http://www.insurance--review.com
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