Why Do You Buy Life Insurance?

Blog Post by CFO and CIC - Sara Giguere

Why Do You Buy Life Insurance?

Did you know the concept of life insurance is a few thousand years old?

Life insurance traces back to 600-1000 BC in ancient Greece and Rome and it was started by a Roman Military general. There was a concept called a “burial club” where surviving soldiers would band together to pay for funeral expenses if any of their fellow soldiers were killed in military combat. What started with the soldiers, spread to the rest of the population, and provided a safety net for the family members of those who died in battle.

Today, if you work a full-time job with benefits, you may have group life insurance sponsored by your employer; this is a wonderful benefit. However, what happens to your group life insurance if you change jobs? Did you know, if you leave your employer, you lose your group life insurance policy with them?

Why does this matter to you? Life Insurance is important, here are some reasons to put life insurance in place in addition to life insurance provided by your employer:

• Income replacement & Debt payoff: the main purpose of life insurance is financial support for your beneficiaries in the event of your untimely death. If you are the primary breadwinner in your family, life insurance can replace your income and ensure your family’s standard of living is maintained. The payout from a life insurance policy is used to pay for living expenses, funeral costs, pay off debts such as mortgages, car loans, credit cards, student loans and more.
• Business Protection & Estate Planning: Do you own a business? Do you have assets? It's important to plan how it will continue, especially if you pass away prematurely. Do you have a plan in place? Who will take over your business? What will happen to your assets (home, car, boat, summer home)? Can your partner(s) buy out your portion of the business? Can your employees hire someone to fill your role as CEO? You can purchase life insurance to benefit your partners which will enable them to buy your share of the business, or your employees can hire someone to run the company. Life insurance is used to protect a business in the event of the premature death of a key employee such as an owner, CEO, or manager. Life insurance is used as part of an estate planning strategy to provide for your heirs and minimize the impact of estate taxes.
• Parents & Student loans: You went to college and didn’t have funds to pay for it; you took out $100K loan to cover tuition, room & board, books & fun. If your parents co-signed your student loan, they may have to foot the bill if you die prematurely (some institutions forgive the loan, however, don’t count on it, buy life insurance to protect your parents).
• Marriage & Mortgage: You graduated college, found your dream job, and got married. Yours & mine is now ours unless there was a prenup involved, this includes financial obligation. If you or your spouse died prematurely, would the remaining debts (car loan, mortgage, student loans, etc) be paid? Would the surviving spouse be able to live on one income? Buying life insurance demonstrates your love for him/her and enables him/her to maintain the standard of living. They have peace knowing they don’t have to worry about making the next mortgage/rent payment.
• Children & Stay-At-Home Parents: It’s an incredible blessing and a large responsibility to raise kids. If you or your spouse dies, who will raise the kids? Who will pay for their basic needs? Will they be able to go to college? Do one of the parents stay home with the kids? If you or your spouse stays home, what would it cost to replace the care they provide your children? Life insurance can provide funds for your child’s education expenses. If you buy life insurance, you will contribute to the financial aspect of providing for your children in the event you or your spouse dies prematurely.

Those are a few reasons to have life insurance in place, however it's not limited to those mentioned in this article. The important part is to plan & purchase. Our agency represents many life insurance companies, please email me at: sara@riskadvice.com to learn more and get quotes. It’s quick & easy, and it could save you or your spouse a lifetime of headaches.