Life insurance may not be an investment plan nor a savings plan, but it can still play a big role in peoples’ financial portfolios. Life insurance aims to protect the dependents of a person from financial difficulties should he die.
There are so many situations in life where financial obligations can arise from, and these can include getting married, getting divorced, having a baby, buying a house, sending a child to college, starting a business, or taking care of a sick or aged parent. A person who has these responsibilities should make sure that these can be taken care of even if he dies. If he has a family who depends upon his earning capacity, he is a perfect candidate for life insurance. A person should consider the long term as well as the short-term financial obligations to decide whether he needs life insurance. The questions to ask are:
Are there people who depend on you financially and for a long time?
Do you think these people have enough to get by if you die?
The second question would involve further assessment of short-term financial responsibilities of the family of the deceased person. These include working out the following factors:
A family would have to spend a lot of time and money for inheritance procedures.
The availability of other liquid assets like bank accounts or stocks can reduce dependency on life insurance.
Having so much more non-liquid assets than liquid assets would increase your need for life insurance.
The amount of debts and taxes the person stands to owe after his death.
And businessmen should make sure that there is enough cash in the business for his inheritors to be able to maintain the business.
With all the mentioned considerations, most people would think that they need life insurance. Still, other obligations like a home mortgage or a sole proprietary business or planning for a comfortable retirement for yourself or your spouse are some of the reasons why a life insurance is still a good financial program to pick up.
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