Even though life insurance is neither an investment nor a savings plan, it is still an important part of most people's financial plans. Life insurance's main goal is to protect a person's dependents from financial loss if that person dies.
Many things in life, like getting married or divorced, having a baby, buying a house, sending a child to college, starting a business, taking care of an elderly or sick parent, or retiring, come with financial responsibilities. If a person is taking on these responsibilities, he needs to make sure that they will still be met after his death. If he has a family that depends on his income, he would be a good candidate for life insurance. To decide if he needs life insurance, a person should think about both his short-term and long-term financial needs. These are the things to ask:
Do you have people, like family members or business partners, who depend on you financially for a long time?
- If you die, do the people who depend on you have enough assets and resources, including cash, to take care of all their needs and pay off your debts?
For the second question, you need to figure out how much money the family of the person who died will need in the short term. Among these are figuring out the following:
Procedures for getting an inheritance can take a long time, and the family will need money until they can get their hands on the property of the person who died.
If you have other liquid assets, like bank accounts or stocks, you may not need life insurance as much.
Having insurance is important if you have a lot of non-liquid assets and not enough liquid assets.
How much the person will owe in taxes and debts after he dies.
Business owners must make sure there is enough money coming in to keep the business going after they die.
Taking the above questions into account, most people do need life insurance, but you don't need it if you don't have any dependents or young children to take care of. Still, you might want to get life insurance if you have other financial obligations, like a mortgage or a business you own on your own. You might also want to plan for a comfortable retirement for yourself or your spouse.
