When is Life Insurance Necessary?
Life insurance is an investment towards the contingency of death. The insurance company agrees to pay your beneficiary a certain pre-determined sum of money at the time of your demise. This money could be paid in a lump sum or installment, depending on the contract.
The first question that comes to mind when one is contemplating getting one’s life insured is whether it is even necessary. Getting life insurance entails indemnifying your life against sudden or natural death. In some instances, life threatening illnesses are also considered sufficient grounds for a pay-out.
The beneficiaries of this insurance are your financially dependent relatives, such as parents, marriage partner, children etc. This provides a pecuniary safety net for your loved ones in their time of grief. Some relationships based on monetary factors are also considered insurable, such as debtor’s life for a creditor.
Most people are ignorant of the benefits of insuring their lives. Life insurance is generally taken out to ensure financial security for one’s dependents after one’s death. Children’s education is one of the primary goals of parents. With the pay-out from the insurance company, your child’s education is secure even after you are gone. For young adults, it can pay for higher education or specialised learning to help them stand on their own feet.
In families where only one member is gainfully employed, it is imperative to have life insurance. Life insurance would not only finance the funeral services but also provide for other household expenses. Everyone has short-term debts at some point in their lives. Life insurance helps cover these expenses after you are gone and eases the burden on your family.
Similarly, if you have taken a home loan, the mortgage payments would fall on your family after your demise. Having a life insurance is a security net for your family in this case, as it will help pay off this payment. Another very good reason for having life insurance is the exemption on income tax. The benefit of tax rebate is clearly obvious even while you are alive.
Life insurance can be necessary and beneficial even if you are retired. There are several instances where you may want to leave a legacy for your children or grandchildren. This can be possible through a life insurance policy. It can also provide for your funeral service, medical bills and any of your unpaid debts.
While the above benefits of life insurance are family related, there are certain other exceptional life insurances also. In cases where a debtor owes large sums of money, the creditor has vested interest in insuring the debtor’s life. This safeguard is necessary for the creditors in case of sudden death of the debtor. Some businesses also insure the life of their key personnel against such an eventuality.
Many partnership businesses find it expedient to have life insurance policies for partners. This ensures the survival of the business after one of the partners expires and does not overburden the surviving partner.
In short, life insurance is necessary if you have a dependent family for the reasons listed above. Even if you are single with no dependents and/or debts, life insurance helps in paying off your funeral expenses. Businesses and companies also find it necessary to insure the lives of key personnel in their ventures to ensure company stability.