Why You Should Buy Life Insurance

If you want to make sure that you can continue to take care of your loved ones even after your own passing, then purchasing life insurance is a must.

Life insurance provides financial support for your beneficiaries following your death. This essential financial protection can have serve several purposes:

Replacement Income

One of the primary purposes for life insurance is to serve as replacement income for dependents who might depend financially on you. Financial experts recommend purchasing enough insurance to payout an amount that, if invested at an annual 8 percent interest rate, would yield yearly interest payments that are equivalent to your annual income.

Death-Related Expenses

In today's world, even dying will cost you, and life insurance can provide coverage of these final death-related costs. Such expenses can include costs associated with your funeral and any estate taxes that might be levied against your dependents' inheritance. It is estimated that a typical funeral could cost approximately $7,000, while being cremated can cost an average of $5,000.

Other Final Expenses

Another way life insurance can assist your dependents is by covering any outstanding debts you might leave behind. Will you have any loans or credit card balances that will need to be paid? Will you have any medical expenses incurred shortly before your passing? Life insurance can make sure that your loved ones do not have to pay your tab.

An Inheritance for Your Heirs

Do you want to ensure that your spouse can live a certain lifestyle after you are gone? Or do you want to make sure that your child can attend that Ivy League school you have always envisioned? If so, life insurance can ensure that enough funds are available to make these dreams possible.

Charitable Contributions

Many people dream of leaving a legacy after they are gone, and life insurance can help you achieve this goal. Through life insurance, you can provide contributions to those charities that have always been important to you.

What Types of Life Insurance Can You Buy?

When shopping for life insurance, there are two primary types of life insurance you can purchase:

Term Life Insurance

The first type of life insurance you can purchase is called Term Life Insurance. This type of life insurance pays only if the policyholder's death occurs during the policy's term, which typically spans 30 years. You can purchase a "level" term insurance policy, in which the death benefit does not change throughout the duration of the policy, or a "decreasing" term insurance policy, in which the death benefit decreases over the course of the policy's term.

Whole Life Insurance

The second type of life insurance you can purchase is called Whole Life Insurance. This type of life insurance, which also can be referred to as Permanent Life Insurance, will pay a death benefit no matter when the policyholder dies. There are three types of whole life insurance policies: a "traditional" whole life insurance policy, a universal life insurance policy and a variable universal life insurance policy.