Who Needs Life Insurance?

If you die unexpectedly, and your death would leave important people in your life on the hook for debt, or unable to pay their bills, life insurance can make sense for you.

Let’s review the scenarios where your death would most likely negatively affect other people financially:

• Someone would inherit your debt. Your debts don’t simply disappear when you die. Co-signers on a loan, joint owners or account holders, spouses in community property states such as California and Texas, and people tasked with settling your estate’s debt who didn’t comply with probate laws are all possibly on the hook to pay your debts.
• Your spouse or partner relies on your income. If you’re building a life with a partner, and that partner counts on your earnings to pay things like household expenses, the loss of your income could be devastating for them.
• Your children depend on your income. Your minor children, unable to provide for themselves, would almost certainly be put at a major disadvantage if your income disappeared. The same is true if they will rely on you to help cover college costs or provide support for a disability.
• Your heirs would owe estate taxes. If your estate is large enough, your heirs could be subject to an estate tax upon your death. In 2021, the federal estate tax kicks in if you leave behind assets totaling more than $11.7 million.
• Your funeral would be a financial burden. According to the National Funeral Directors Association, the median cost of a funeral with viewing and burial is $7,640. Depending on your wishes for your funeral, it could cost more. Life insurance can be a way for you to pay your own way, so to speak, keeping the burden off of those tasked with executing your funeral wishes.
• Your business, and the people it employs, might otherwise fail. If you own a business, your business partners and/or employees also depend on you. Life insurance can provide assistance to these people after you’re gone.  This is part of business succession planning.