No one wants to think about their death and how it will impact others. But, if you have anyone in your life who depends on you, you must think about it. While you can’t ease the emotional burden of your loved ones when you die, you can help alleviate their financial burdens. An important part of the estate planning process is assessing life insurance needs.
Everyone’s situation is unique; and different types of life insurance policies meet different needs. Is your salary the main source of your family’s income? Are you a stay-at-home parent or caregiver? Do you have a child with special needs? Are you a small business owner? Have your children grown and started their own families?
This information from Nerdwallet.com demonstrates how life insurance funds can help in different scenarios. It can:
- provide income replacement, so that your family can continue to pay everyday expenses;
- cover the cost of paying for services the stay-at-home parent does for “free,” such as child care and home cleaning;
- fund a trust, to ensure a child with special needs will have life-long financial support no matter when a parent dies;
- cover mortgage payments, student loans or other debt, so your family won’t inherit debt or be forced to move;
- fund a buy-sell agreement that allows a business partner to buy out your share;
- provide a supplemental source of income for someone who has maxed out other retirement plans.
Term life lasts for a specific number of years and can be purchased, for example, to cover your mortgage or other debt. If the term expires before you die, there is no payout. Whole life and other types of permanent life insurance policies usually include a “cash value” account that builds value over time. This could help during retirement, if needed.
Assessing Life Insurance Needs
If you haven’t reviewed your life insurance in the past few years, schedule an appointment with your financial planner to help make sure your needs are being met.