While not everyone may need life insurance, there are some common uses that might be beneficial to you and your specific situation. In this video, Allison Alley, CFP® describes some of the reasons you might consider purchasing life insurance.
So one of the questions we get quite a bit is whether or not somebody needs life insurance. The main purpose of life insurance is to create financial flexibility for your beneficiaries. The biggest reason people get life insurance is to create income replacement. So for example if you’re the primary breadwinner and you have a spouse that doesn’t make as much or doesn’t work and you have minor children and something happens to you, well then those life insurance proceeds are going to be able to provide your spouse with the flexibility to make different choices she or he might want to pay off the mortgage. They might want to make sure that kids college can still be paid for. It’s really to ensure that flexibility is available.
Another reason people get life insurance is to make sure there’s liquidity after you die to pay estate taxes. Currently, the estate tax exclusion is $11 million, so you may not actually be subject to estate taxes – but if you are, you want your beneficiaries to be able to pay the taxes without having to liquidate assets in your estate. If you hold a bunch of real estate, they may not want to have to sell those properties to pay estate taxes. Insurance is going to be able to ensure that they have that choice.
Another reason would be funding a buy/sell agreement with a business partner or potentially leaving a significant legacy to charity after you die. Keep in mind, there’s a lot of different products out there. So if you do determine that you need life insurance, you really want to do the research on all those different types of products so that you get what’s most sensible for your situation. If you have any other questions contact us at PureFinancial.com.