Before I became a financial planner, I never thought much about the value and need for life insurance. I knew that I had coverage through my employer, and I always assumed that this would be enough for my family should I pass away unexpectedly. Life Insurance is a difficult money "investment" to justify because we will never see the return on this "investment;" however, there are three reasons why life insurance makes sense for you and your family.
1. You are Married
If you were to pass away unexpectedly, your spouse would be responsible for managing and paying all of the debts that may have been incurred before you passed. In addition, he or she will also have the added cost of providing for your memorial or burial arrangements. It is traumatic enough to lose the person you love; however, the grief will only be compounded if the spouse is left with a financial burden as well. Insurance will provide your spouse with the ability to manage the finances and maybe even the flexibility to take time off from work to manage the emotional trauma.
2. You own a Home
If you own a home with your spouse or significant other, this is a large debt for one person to assume in the event of an untimely passing. This could be an even greater burden if the person who passes was the higher income provider in the relationship. Selling the home could be an option; however, if the real estate market is not strong, then the surviving homeowner will be forced to take a loss or a financial hit in order to sell the home. Insurance will give the surviving homeowner the ability to stay in the house and determine the best next steps in life on his or her own time.
3. You have children under the age of 25
Whether or not you plan to pay for your children's education, they require various amounts of financial commitment up until a certain point in their lives. It would be difficult for any child to lose a parent; however, the loss would be compounded if the child also suffered financially because of a resource drain on the surviving parent. Life insurance would give the surviving parent the security to pay for education if they chose or at the very least, it would cover the costs of supporting the children until they reached adulthood.