You could leave all those who depend upon you in a scary situation. Without a payout from life insurance your family might have to sell assets just to cover every day bills or taxes.
By: Natasha Morgan
I remember when my father went to visit a doctor who had not been our family physician, I was worried that he was seriously ill until he explained that it was only an “insurance doctor”.
He had recently been promoted to Managing Director at his work and their company policy dictated that all executive managers had to carry life insurance. I naively thought it to be a nice gesture until I learned that the beneficiary of the policy was the company not his family.
Why would a company take out a life insurance policy on its employees?
“It’s good business practice” explained my dad. He was responsible for the entire operation of the company and if he was to die, it would be difficult to find a person with his background and experience to replace him. The company could find itself in a position where it might lose money. The job search alone would be expensive and time consuming and in the meantime the company had to keep running.
Although my father was cheerful in our conversation, it began nagging thoughts about what would happen to us if he really was to die. This was the first time that these unnerving thoughts entered my mind. As a youngster, I thought my parents would always be there. I didn’t think about illness or accidents; they happened to other people.
Years later when I became a parent myself, I saw the value of life insurance to protect my family. Even as an adult, we don’t like to confront our own mortality. It’s easier to brush it aside and live in “fool’s paradise”. However, if you stop and think about it just for a minute, you’ll be convinced that life insurance for most people should be a high priority.
Your family will have cash to cover the following items:
* Daily living expenses
* Mortgage payments of your home
* Any outstanding loans
* Car payment
* Day care
* Pet care
* Educational tuition
* Outstanding credit card debt
* Medical bills
* Funeral expenses
* Estate taxes
* Moving expenses
* Job search
How much insurance is enough?
An independent financial adviser is the best source of unbiased information to suit your needs. In general, if you compare the total income that you bring home with the total sum of your family’s ongoing financial expenses, you will get a picture of what they would face if you should die.
Just going through the above exercise, makes you realize the position in which you would leave your family without a payout from life insurance. Having to sell assets to cover every day bills or taxes could leave all those who depend upon you in a scary situation.
Deciding on whether to buy life insurance and how much, is an individual decision.Â I’m glad that my father bought enough insurance to take care of my mother until her death at 85.
A final thought…
Your beneficiaries won’t have to pay federal income taxes on the money they receive.
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