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Life insurance is the most common way to protect your loved ones when the unthinkable happens. While heirs and estates are things most commonly associated with someone who is very wealthy, the reality is that almost anyone can leave their heirs with an inheritance while covering their own funeral expenses using a life insurance policy’s proceeds. Life insurance can be very affordable and with advances in underwriting, you can often get an online quote within minutes without a medical examination. If you are still curious about why getting a life insurance policy can be a good decision, please read the five reasons why life insurance is important for funeral planning below.
1. Security for Your Loved Ones
You never know what is going to happen each day. If you are the main breadwinner in the household and the person who provides the largest income, then obtaining life insurance is a must. It can ensure that your loved ones have enough money to live off of if you pass away unexpectantly. Life insurance provides security for your children as well. It can cover the costs of going to college if you were going to put money into a college fund but are still in the process of doing so when the death occurred. Mortgage payments can also be made (or the debt can be completely paid off) with a life insurance policy’s proceeds so that those living in the home have drastically smaller housing expenses. This much-needed security can ensure that you can sleep easily at night knowing that if the worst happens you have taken care of your family.
2. Covers Funeral Costs
Some people save and plan for their funerals but most people do not, either because death is unexpected or because they cannot bring themselves to plan for their own death. Nobody wants to think about death and if you’re still middle-aged planning for your eventual demise can be very low on the list of priorities. Life insurance can help you here. It can cover the cost of your funeral. Your spouse or children don’t have to suddenly find the money at short notice to cover funeral costs, which can be anywhere from $2,000 to $10,000 depending on where you live and what kind of funeral takes place. Life insurance proceeds can also pay for your body to be repatriated if you die suddenly while abroad. With a life insurance policy, you can rest assured that you will have the send-off you deserve and even a lasting monument to your life such as a gravestone or memorial, without forcing your family to cut costs or take on debt to honor your wishes and memory.
3. Covers Any Debts
The average debt of an American is $38,000. Maybe you have recently financed a car or bought a new house. If your life continued in the way you expected – healthy and prosperous – you should be able to service these debts and eventually become debt-free. But if you happen to die unexpectantly, those debts will have to be resolved by your estate. While some states give the family of the deceased certain legal protections for the primary home, other debts will be collected on your estate. If your estate does not have the money or assets to satisfy these debts then your heirs will be left with nothing. A good life insurance policy can ensure that all of your debts are covered since you can designate your estate as the beneficiary of the policy and can use those proceeds to pay off any outstanding debts.
4. Benefits Outweigh the Costs
Life insurance can be used in many ways and the monthly payments can usually be quite low. Many people are surprised to find out just how inexpensive a life insurance plan can be (we work with Policygenius, which allows you to receive and compare quotes from different national life insurance policies. Many life insurance companies today use advanced algorithms and underwriting processes, so they can get you a quote or offer within minutes of filling out your application, all without a medical examination. You may be asking yourself how do these companies make money with such low payments and big payouts, well a dirty little secret is that many people let their policies lapse, so the company never has to pay out the policy benefits. So as long as you always make your payments your family will be covered.
5. Life Insurance Covers Businesses
The final reason to get life insurance is important for anyone who owns their own business, especially if they are a sole proprietor. In the case that you pass away and you want your business to go to your family you may have to pay taxes (especially if your state levies an estate tax or heir tax). For many families that means they do not have the money on hand to pay the taxes for the business, they would be inheriting and therefore need to sell the business itself to pay the tax bill. The way to avoid this tragic situation is to take out a life insurance policy so that they can use the proceeds to pay the tax bill and inherit the business from you in whole. This is a common estate planning strategy and you should always speak with an estate planning attorney if you have complicated or large assets that you wish to pass on to your family.
Life insurance is a simple, but very flexible, financial product that can greatly alleviate many of the issues and problems associated with death that the average family will face. Whether you simply want to leave money for your children and spouse, pay off debts, pay funeral expenses, or satisfy a tax bill, you can do all or any of these things with a life insurance policy all in exchange for small monthly payments. That is why so many individuals choose a life insurance policy as an integral part of any financial planning or estate planning.
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The information provided does not, and is not intended to, constitute legal, accounting or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only.