Life Insurance: Do You Need It?

​Wondering whether you need life insurance? According to a recent study from LIMRA, it’s very possible that you don’t have enough protection. The study found that 30 percent of American households have no insurance and that 48 percent of households have a coverage gap of approximately $200,000 each. In fact, households with life insurance have, on average, only enough to replace three years’ worth of income.1
 
Unexpected death is one of the most significant risks you and your family face. The loss of your income could create serious financial hardship for your spouse, children and other loved ones. Life insurance can be an effective tool to manage the risk. 

How do you know if life insurance is right for you? Below are a few groups who may or may not need life insurance, depending on their specific needs and goals. You should base your decision on your unique objectives and risks.

Parents
 
Many people buy life insurance for the first time when they become new parents. Your child is likely dependent on you for support, both financially and in other ways. If you pass away, the child will lose the support and protection you provide.
 
Life insurance can create funding and liquidity to pay for your child’s care if you pass away. You also may want to leave money to help pay for your child’s education or other goals. If you’re married, you might leave the funds to your spouse. If not, you may consider setting up a trust for your child’s benefit.
 
Even if you’re not the breadwinner in the home, life insurance could still be important. Stay-at-home parents still provide support in the form of child care and household maintenance. If you were to pass away, your spouse may have to pay for child care and other services. Life insurance can be used to replace all kinds of support, not just income.

Individuals With Significant Obligations
 
Even if you don’t have children, you may have other sizable obligations. For example, life insurance is often a requirement for major purchases that are funded by loans. If you take out a mortgage, the lender may require you to have life insurance to cover the loan balance if you pass away.
 
If you own a business, you could have obligations that still need to be paid even if you die. For instance, you may have outstanding loans. You could have employees who will need to be paid. The business may need liquidity to keep running in your absence. Life insurance could be a valuable protection tool.

Retirees With No Minor Children
 
Most people need life insurance when minor children are in the home. But what happens when those children grow up and move out? Do you still need life insurance at that time?
 
Possibly. You may no longer need life insurance to support your children after you pass away. However, you could need insurance for other reasons. Perhaps you want to create liquid assets for your spouse after you pass away. Or maybe you want to leave tax-free assets to your children or grandchildren. Life insurance can be used to help you achieve your estate planning goals.

Children
 
Children usually don’t need life insurance protection because they don’t have dependents. However, you could use life insurance as a financial planning tool for your child’s benefit. For instance, you could use a policy that has a cash value component to accumulate money. When the child goes to college, you could take funds out of the policy on a tax-efficient basis to help pay education costs.
 
Ready to explore your life insurance needs? Let’s talk about it. Contact us today at J. Harris Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

 
1http://www.prnewswire.com/news-releases/limra--nearly-5-million-more-us-households-have-life-insurance-coverage-300335782.html
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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