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Who needs life insurance?

Single young people in good health and with no family commitments may decide they do not need life insurance. But, as and when they acquire responsibilities, the majority start thinking about what insurance is needed to provide for their dependents when they die. There are two major issues to consider. The first is what debts will be left behind. The legal problem is that all debts fall due to be paid in full when the borrower dies. Some, like the mortgage, can be significant and, without an adequate lump sum provided by a life insurance policy, the family may be forced to sell their home and other assets to repay what is owing. So, when it comes to planning what provision to make, the family should estimate how much is going to be required to pay off all liabilities. Somewhat ghoulishly, this includes the costs of health care during the final years and of the funeral. Although it is not always pleasant to think about death, making provision for medical expenses and getting quotes from funeral homes is a necessary step. Some insurance companies offer a separate burial policy to cover the cost of casket, grave plot, hearse and so on. Then it is important to monitor what is happening to the debts. If the amount of death benefits starts to look inadequate, further provision should be bought.

The second issue is how the survivors will manage if the policyholder is the main breadwinner. This can be important if some of the dependents are young or disabled and so unable to work. For people who are employed, one rule of thumb is to provide the a lump sum representing about seven years of pay. To this should be added other sums to cover foreseeable expenses, e.g. the cost of college or university education for children. For those who run a family business, the needs are slightly different. This involves succession planning both to decide who will take over the running of the business and to ensure the business can remain a source of financial support for the family.

All this planning should consider whether the estate will incur probate and estate taxes. It may be better to consult a professional to transfer ownership of the family home or business to avoid tax. Being able to use the investment elements of whole life and universal policies for tax-efficient saving offers protection against unforeseen debts. Having the right policies in place for the right reasons is essential. So, for all purposes, use this site's search engine to find the insurance companies offering the best policy terms for the most affordable premiums. This is the best way to achieve peace of mind for all concerned.


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