Life term is not something many people would love to talk about, let alone hear about it. However, just like taxes and death, purchasing life insurance is a critical part of life and an essential aspect of sound financial planning.
If you are like most people, then it’s likely that you are aware of the importance of a life term. However, it’s also likely that you are procrastinating about it, hoping that everything will go as smoothly. Well, the truth of the matter is things don’t always go as planned. So, instead of waiting for a significant life event to push you to buy it, it’s wise to invest in insurance early on. This is especially true if your spouse, children, or family members depend on you financially.
Still wondering whether you should get life insurance or not? Here are six reasons why you need term life.
You are married
If you happen to leave this world tomorrow, is your spouse going to be able to pay rent or mortgage, credit card bills or car loans without your income? If the answer is no, then you should consider purchasing a life term insurance and include them as the beneficiary. This way, they will still manage to take care of the debts, maintain the kind of lifestyle you had built for them and take care of the burial cost as though you were here.
You have children
Buying a life term is a smart choice when you have young children. Should you pass on when they still cannot take care of themselves, the beneficiary – often the other parent – could use the funds to support the kids through school, among other needs. You may also consider setting up a trust to hold life term funds for the kids and include the trust and trustee as beneficiary. In such a case, the trustee only manages and spends the money as per the rules stipulated in the trust document.
Cover burial expenses
The funeral and burial expenses can easily run into tens of thousands of dollars and may take a toll on your family’s finances, and even lead to debts. A life term can ensure everything is in place for those you love once you are gone. It will help lift the financial burden off their shoulders.
You have a large estate
If your estate is subject to federal tax, you can use a permanent life term like whole life to cover your heirs. With this money, they will be able to pay the taxes without having to sell off assets. Remember that only large estates are taxed at the federal level, so you may want to look into this keenly.
You have a debt
If you happen to leave this world before paying all the debts you owe, then your co-signers will have to bear the responsibility. To cover your loved ones as well as anyone else who assisted you to qualify, you should purchase enough life term to offset the loans and include your co-signers to the list of beneficiaries.
You own a business
A life term cover also protects your family and business if you die suddenly. With the death benefit, your loved ones can clear any business loans that used your assets like home or car as collateral. Other than that, the life cover can also be used to support buy-sell agreements – if you die, your partner may use the death benefit to buy out your shares.
As with many things related to the financial planning sector, life term can seem overwhelming and complicated at first. Get help from someone you trust, like a professional, and don’t be scared to ask questions. Life term insurance is a big undertaking, but at the same time, it is something that has the potential to affect your loved ones seriously later on.