Though Life Insurance is neither an investment plan nor a
savings scheme, it still plays a significant role in the
financial portfolio of most individuals. The main purpose of
Life Insurance is to protect the dependents of a person from
financial loss in the event of his death.
Financial obligations arise out of many situations in life like
when getting married or divorced, having a baby, buying a house,
sending your child to college, starting a business, taking care
of a parent who is aged or sick or on retirement. If a person is
shouldering these responsibilities he must ensure that these
obligations continue to be fulfilled even after his death. 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:
1. Do you have people including family and business partners
who are financially dependent upon you over a long period of
time?
2. In the event of your death, do your dependents have enough
assets and resources including liquid cash to take care of all
their needs and to pay off your financial debts?
The second question requires a further assessment of the
short-term financial needs of the family of the deceased. These
include working out the following factors:
Inheritance procedures can be time consuming and the family will
need funds till they get access to the property of the deceased.
The availability of other liquid assets like bank accounts or
stocks can reduce dependency on life insurance.
The existence of a large amount of non-liquid assets as against
liquid assets makes it necessary to have insurance. The amount
of debts and taxes the person stands to owe after his death.
Businessmen must ensure there is enough cash flow in the
business for his inheritors to maintain his business.
Considering the above questions, one would find most people do
need life insurance, though one can do without it if one has no
dependents or young kids to support. 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.
About the author:
Marcus Dubois is a veteran in the insurance industry, and
recommends InstaQuoter to get an
instant life insurance
quote.
