Whether you’re a married person with kids or have relatives or a partner who is financially dependent on you, having a life insurance policy is important. It provides a lump sum, or a “death benefit,” to a chosen beneficiary once you have passed on.

This means that your loved ones will have access to money whenever it’s necessary to cover a variety of things from household bills to paying off debts.

Understanding why life insurance has such significance could help you to plan and cater to the financial needs of your beloved for the long term. Even if you wondering how to get cheap life insurance, we assure you many reliable companies offer the best rate for various ages and genders.

If you’ve ever wondered how life insurance policies work but aren’t entirely sure why they are necessary, say no more! This article will highlight the most important reasons why you need life insurance.

1. To Protect Your Family And Loved Ones

Life Insurance Explained

Life insurance is a great way to protect the financial future of your family. Even if you’ve tens of thousands in your savings account, it is highly unlikely that this would be adequate to cover your family’s expenses for an extended period.

If you are the sole breadwinner in your family then life insurance is a must! A life insurance policy will replace your income after you die, allowing your family to continue their standard of living if something happens to you unexpectedly.

Your life insurance policy can cover funeral expenses and menial household tasks such as grocery shopping, cooking, paying for childcare, and even paying for rent. It may also be used to cover monthly bills and pay off a mortgage. Essentially, it’s there as financial aid for the family members and loved ones who remain in the event of your death.

2. To Help Your Family Pay Off Debts

There are various kinds of debt that do not go away even after your death, which means your beloved or loved ones will be left with the burden of having to pay them off. They may use funds from your estate or even sell external assets to pay the full cost, which may leave them in a bit of a financial rut.

Life insurance is a great way to guarantee that your beloved or loved ones have the funds to cover any types of debt that you might leave behind. This may include anything from mortgages to education loans and credit card debt.

When your beloved or loved ones are already dealing with such a huge loss, ensuring that there is a life insurance payout ready for them to use to cover said debts could help them with the financial struggle that they may be facing after you die.

3. To Support Your Spouse

Support Your Spouse

If you have recently gotten engaged or married and are merging your assets with your spouse, it may make your joint life a little easier knowing that you’re both covered in the case that one of you were to die.

Life insurance gives you the scope to make various financial contributions to the life of your spouse after you die. Not only will this give them peace of mind during such a tumultuous time, but knowing there is money there to support them is a sacred way of honoring your marriage vows, too

Though this is true, it is likely in your best interest to take out two single policies so that the complexities of a joint policy aren’t felt if you were to pass on. Many factors go into determining the amount paid out by a life insurance policy, but having two separate ones in a marriage instead of a joint policy guarantees two payouts rather than just one.

It also takes away any additional stress if you were to separate at any point during your marriage, so you can go on paying your life insurance rate as normal.

4. To Cover Education Costs For The Next Generation

Like most parents, knowing that your kids are well taken care of in any situation is paramount. If you have children of your own then taking out a life insurance policy is a clear logical next step to take!

The financial security of your children in a situation when you are no longer here will undoubtedly be playing on your mind, and education is one of the most important things to consider. This may entail covering the cost of private education or paying towards the total cost of college.

College tuition is steadily increasing which may make it difficult for them to completely cover the costs of their education. However, the death benefit obtained from a life insurance policy may provide life-changing funds that can be put towards covering the total cost of your child or children’s future education.

5. To Pay For Funeral Costs

Funeral Costs

Most importantly, a life insurance lump sum payout is an effective way of covering funeral costs once the policyholder passes away. Funerals are generally quite expensive, averaging anywhere between $7,000 and $12,000. You will usually be paying for the following:

  • Viewings
  • Burial
  • Service fees
  • Casket
  • Transport
  • Embalming

With all of these factors — and all other prep — a funeral can work out to be quite costly. Of course, there are ways to reduce this number. For example, opting for cremation instead of burial may reduce the price, but adding in extras like flowers, a monument, a marker, or a spot in a cemetery will increase the overall cost of a funeral.

A death benefit from a life insurance policy would go quite far to cover these costs, reducing the financial stress on remaining family members.

Summary

While there are many benefits to taking out life insurance, these are the top five reasons why you need to have it in your life. By paying a fixed premium you are all but guaranteeing the financial security of your nearest and dearest in the event of your death. This not only sets them up financially but ensures that they don’t have any excess burdens on their shoulders while they are dealing with your passing.

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