Life Insurance: Who Needs It?

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A life insurance policy constitutes a legal and binding contract between the insurance company and the policyholder. For an agreed-upon premium, usually a fixed amount paid monthly or annually, the company pays a benefit to the beneficiary named in the policy. Simply stated, if you take out a life insurance policy, the people you designate will be paid when you die. How much you pay for the policy generally depends on several things: your age, health, lifestyle, and how much the policy is for.

There are numerous reasons to buy life insurance. Some of them are:

Family Security - Men and women with a partner, spouse, and/or children definitely need to take a serious look at a life insurance policy. Many people live on two incomes and if one disappears because of death, the survivors could end up in dire straits. If you provide the only income, consequences for your loved ones could be catastrophic.
Financial Security - Some life insurance policies allow you to invest part of the money you put into them. Although these are often advantageous, make sure you do your homework before choosing this type. For example, the 401k your employer offers may provide a better return and save you tax dollars.
Nest Egg - Specific types of life insurance allow you to borrow against them in a crisis or for something important like the down payment on a home.
Final Expenses - Many people use life insurance to pay for their funerals and other expenses that come up after they die. This saves their friends and families from coping with a financial mess when they're gone.

Almost everyone can benefit from buying a well-chosen life insurance policy to protect their loved ones from financial ruin. Policyholders should re-evaluate their coverage every time they marry, have a child, buy a home, divorce, or experience a change in their standard of living. Single, childless people also should consider life insurance to cover funeral expenses or as an investment.

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