Do I Need Life Insurance Coverage?
If other people are dependent on you and will suffer financially if you die, then yes you need life insurance.
For example, life insurance is a necessity for anybody who has dependent children. You don't need it if you do not have financial dependents, except, to maybe cover funeral expenses for which there is buriel insurance.
Far too many Americans have not considered the ramifications their passing would have on their family's future. Mortgage payments, estate taxes, tuition, health insurance increases, debt, funeral expenses and legal fees are but a few of the expenses that must be absorbed by your family after your death. Furthermore, it is just as important to consider future expenses for your family to maintain or improve lifestyle conditions.
In addition to helping to support dependents, life insurance can help solve several other common estate planning problems by:
- Providing immediate cash at death. Insurance proceeds are a handy source of cash to pay the deceased's debts, funeral expenses, and income or death taxes. (Federal estate taxes are due nine months after death, so cash to pay them doesn't have to be raised immediately.)
- Avoiding probate. The proceeds of a life insurance policy are not subject to probate unless you name your estate as the beneficiary of the policy. If anyone else, including a trust, is the beneficiary of the policy, the proceeds are not included in the probate estate, and can be quickly transferred to survivors with little red tape, cost or delay. Except when your estate will have no ready cash to pay anticipated debts and taxes, there is no sound reason for naming your estate, rather than a person, as the beneficiary of your life insurance policy
(For a more detailed discussion of the advantages of avoiding probate please click here
- Reducing death taxes. When an insured person does not legally own his or her life insurance policy, the proceeds are excluded from the insured's taxable estate. This can significantly reduce death tax liability of the insured's estate. Obviously, though, this benefits only those whose estates are large enough to face death tax liability in the first place
Fact is, a lot of Americans who probably should have life insurance simply do not and while the liklihood of a primary breadwinner dying unexpectedly is low, the ramifications of not having a contingency plan can be devastating.