Life insurance doesn’t make sense for everyone, but it’s more likely than not that you will be affected by one or more of the expenses listed below, where life insurance is not only smart, but important to make sure that you don’t pass on any financial issues onto your loved ones.
Life insurance is designed to keep your loved ones financially secure when you’re no longer here. When you’re gone your loved ones will receive a lump sum from your life insurance policy. How much and how it’s shared is up to you, but there are expenses to consider. We’re breaking down these expenses so that you can stay informed as to how much you will realistically be leaving your loved ones. Maybe there is something you haven’t considered or given enough thought. Read on to find out all the details.
Funeral expenses
The initial cost that your loved ones will have to think about is your funeral. Even the most basic of packages can cost over $6,000 without adding on elements like a cemetery, marker, monument or smaller items like flowers. This price strictly covers only the viewing, burial, embalming, transport, casket, and service fees. The bare minimum.
When it comes to the medical exam you take for life insurance, you will be tested on your blood pressure and pulse, a blood test and a urine sample. This will determine if you are insurable or not, looking for anything that might indicate an earlier exit than you were expecting, so it’s important that you do it sooner rather than later.
If you find something down the line with no life insurance, your funeral expenses will solely go to your loved ones with no input from you, creating quite the burden.
College/school
If you have young children, you might want to take out a life insurance policy to help save for their education. Should you leave before they reach college, your policy could go a long way to covering their tuition and dorms.
What can help here is that, if you are lucky enough to see your children go to college, you can tap into your life insurance savings to pay for tuition. This ability does depend on the policy, but if you are sharp and choose the right one you can tap into it as you need to.
Mortgage
A life insurance policy will also help your loved ones keep their home once you’re gone. If you are paying regular payments to your mortgage, and suddenly that income is gone, it can be very difficult to keep a hold of the home you were contributing to.
This can cause a lot of stress, if your partner perhaps has to downsize and move out, or your children lose their childhood home. By offering money to keep paying the mortgage, you will ensure that the home stays in safe hands.
In a similar vein, the lump sum you leave your loved ones can contribute to a down payment on a new home. If, as mentioned, they need to downsize or your children are looking for their own family home, the down payment from your life insurance policy can take a good chunk out of the price, making future payments easier.
Care
Not every decision to take out a life insurance policy comes down to when you’re no longer here. A policy taken out early can allow you to save up as time goes on, and you can use it to ensure you get the care you need.
This can take a big burden off your loved ones, who might otherwise be forced to put their life on hold to care for you. If you are aware of the possibility of a debilitating or long-term illness, either due to health or genetics, you might want to consider a life insurance policy. The money you save now could cover medical bills in the future and any ongoing care you might need, be that an at-home nurse or admittance to a home, when you don’t have an income.
Debt
Debt is another means of passing on a burden. When you die it is your beneficiary that will receive the responsibility of paying off your debt. Any assets you plan on leaving your loved ones might well be swallowed up by the debt you accumulate in your lifetime.
Gaining a life insurance policy will go a long way to helping your loved ones with wiping the debt. The best thing for everyone is to wipe the debt, but that is notoriously hard. If your repayments aren’t making much difference, the combined saving of your money and the life insurance policy can make it easier to deal with at the end of life.
Plus, some policies will allow you to withdraw from your savings, should you get into debt later in life and need a way to get rid of it.
Income replacement
If you are substantially contributing to the income of your home, suddenly not having that there can be very difficult for whoever you leave behind.
Luckily, you can get policies that, rather than offering a lump sum to your beneficiaries, will instead regularly pay out in smaller doses, so that your loved one can live off your life insurance as a source of income and maintain their quality of life.
Retirement
This can be even more important if you or your loved one is reaching retirement age. If your beneficiary is no longer working, you can set up a policy that allows for the regular smaller withdrawal from your life insurance policy so that they are kept. Between the life insurance income and their own pensions, they should have enough to keep them comfortable for the rest of their life.
There are a lot of ways a life insurance policy can help your loved ones in the future. These are just some of the most common examples of how they might need to use your money when you’re gone. Take a look at life insurance policies to see if there is one that fits your needs.
