Page 57 - Book5E

CHAPTER 8
Understanding Your Life Insurance Policy
Life insurance could possibly be one of the most important purchases you’ll ever make. Should a tragedy strike, money from life insurance coverage can help pay the bills, continue a family business, finance future needs like your children’s education, protect your spouse’s retire- ment plans, and much more.
So who needs life insurance? If someone depends on you financially— spouse, children, an aging parent—chances are you need life insurance. It provides cash to your family after your death. This cash (known as the death benefit) replaces your income and can help your family meet many important financial needs like daily living expenses, mortgage payments, and college savings. What’s more, there is no federal income tax on life insurance benefits.
To figure out if you need life insurance, you need to think through the worst-case scenario. If you died tomorrow, how would your loved ones get along financially? Would they have the money to pay for your funeral costs, medical bills, taxes, debts, lawyer’s fees, etc.? Would they be able to meet ongoing living expenses like the rent or mortgage, food, clothing, transportation costs, healthcare, etc? What about long- range financial goals? Without your contribution to the household, would your surviving spouse be able to save enough money to put the kids through college or retire comfortably?
It’s always a difficult time when you lose someone you love. But your emotional struggles don’t need to be compounded by financial difficulties. Life insurance helps ensure that the people you care about
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