What Should Life Insurance Cover?
Life insurance is a tool that is used to help manage financial risk in the event of some uncontrollable event.
Two uncontrollable events that can impact us with our financial goals are death and disability which cause our ability to earn income to come to a complete stop!
Why Have Life Insurance?When you die, your family will have an immediate need for cash to pay for your final bills. Insurance is a tool to create a pool of funds to be used when it is most needed.
Life insurance also helps replace the income stream that was lost when you passed away.
The types of expenses can be grouped into three categories: Final expenses, family care expenses, and survivor expenses.
Final ExpensesAs mentioned above, final expenses create a pool of funds for your survivors. These expenses may include:
Funeral expenses, Final medical bills, Current family bills and household expenses, Outstanding loans Unpaid property taxes Probate fees and legal costs, and Final income taxes. Family Care ExpensesThe life insurance should provide for your family and their current and future needs. Life insurance should provide the following:
A permanent residence. The policy should cancel or significantly reduce the mortgage on the primary home. Education - Your insurance should help prevent an education plan from falling off track. Emergency Fund- Your life insurance should also provide an emergency fund that your family can draw on in case of...