Practical Reasons Why You Need Life Insurance

We spend our lives building. Not necessarily in the literal sense, but so much of our time and effort goes into building a life we love. A life worth living. We don’t only do this for our own benefit. We do it for our children, for our loved ones. It’s easy to get good health insurance in Canada, but life cover is often different. Even just getting the right advice for ensuring our family’s financial future can be a daunting task.

The problem is that all too often, the lives we build heavily depend on us. It is our work, our resources that go into keeping things afloat. You may already have seen first-hand what can happen to a family when the head of a household passes. How do we protect our loved ones and our children’s future from succumbing to this same fate? There are several options. A smartly drawn up will and testament can go a long way. In addition, investments and trusts can help secure certain aspects of your portfolio.

But these can only go so far. A number of your investments will require upkeep. Without your income, your family runs the risk of losing these assets. Mismanagement can also be a big problem. This is where life insurance comes in. Today we invite you to join us as we look at the practical reasons to get life insurance.

Image Credit: Don O’Brien – Practical Reasons Why You Need Life Insurance

Sustaining Your Portfolio

Many people think of life insurance as the primary means left to their family for survival. This can sometimes be the case, but an altogether more important function of life insurance is to replace financial expenses left in the wake of your passing. You pay for your properties’ upkeep and general expenses; you use your income and resources to take advantage of investment opportunities. So what does your family do when you are gone?

As we have said, your loved ones will likely have to part with most of these investments. This usually means liquidating assets. But, unfortunately, most times, after someone passes away, the liquid capital is never properly reinvested. This makes sense. Your family now needs the funds to survive. But, unfortunately, liquid capital invariably depletes. This can see your family left in financial ruin.

A life insurance payout can be invested for the sole purpose of sustaining and maintaining your current portfolio. This means that your family inherits a self-sustaining trust and can benefit from it for generations.

Debts And Expenses

A big problem that families face when a loved one passes is paying outstanding debts. Unfortunately, this is another thing that can financially cripple a family, regardless of your financial status. In fact, the better your portfolio and general finances, the more likely it is that you may have some large outstanding debts. This includes everything from your mortgage to your cellular contract. In addition, you can protect your family from falling prey to unforeseen debt repayments. You can achieve this by keeping a standing life insurance policy that runs equal to your outstanding debts.

In doing so, you provide loved ones with the resources they need to cover such costs. This, in turn, secures the assets that you have left to them, preventing any forms of foreclosure and bad credit scores.

Education

Most parents pay as much of their children’s tuition as possible, directly out of pocket, so to speak. This money is often sourced directly from your active income, sometimes subsidized by some form of a college fund. A college fund alone is not a guarantee that there will be enough money for your children to get a higher education. Tuition fees increase nearly annually. Using a life insurance policy as a buffer is a great idea.

In essence, this is similar to securing your family’s future by accounting for the loss of your income. It makes provision for funds that you would have covered had you been present and able to dedicate money from your income.

Inheritance and Estate Taxes

In some cases, you may feel that there is no need to leave behind an additional policy. This is especially true if you are financially independent. However, it may still be wise to go a reasonable amount to your family through life insurance despite financial security. The larger your portfolio and estate, the more your family stands to pay in inheritance taxes. This could end up being an amount so large that it could wipe out, as it were, an entire chunk of your family’s wealth.

To avoid this outcome, you can take out a life insurance policy covering the projected taxes and transfer costs. A good policy can see that your family does not lose any of your assets in the inheritance process.

Generational wealth is under constant attack, with once-prominent families often seeing their lives fall apart around them, their finances reduced to the point of squalor. Of course, this is avoidable by making smart investments. But to protect those investments, there is no better option than a life insurance policy designed to cover estate and inheritance taxes.