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What are some of the specific uses for life insurance?
Some of the uses of life insurance are:
- To buy time -- time for the family to go through the grieving process.
- To save a home by leaving a roof over the family's head, instead of a debt.
- To replace lost income.
- To provide a retirement.
- To preserve the family's lifestyle
- To pay taxes, especially estate taxes so that family property or the business doesn't have to be liquidated
- To provide the funds to buy out a deceased business partner's interest in the business (this requires special handling).
- To pay for college.
- To be a starter plan that at least pays for two years worth of lost income.
- To pay off medical bills due from co-payments owed and expenses that weren't covered by the health plan (it happens).
- To pay for funeral and burial costs, etc.
- To maximize retirement income by eliminating the need for a married couple to choose a joint and survivor option.
The life insurance proceeds don't even have to be paid out in a lump sum. A financially savvy person would take it in a lump sum and invest wisely any portions not immediately needed and would probably do better. But not everyone is financially savvy, nor is everyone capable or willing to become so, even though maybe they should. The real determining factor is not what they need to do or should do, but what they are most likely to do once the money is actually in their hands. So another life insurance pay-out option is to provide a monthly income instead of a lump sum. This can be especially attractive when there is fear that the intended beneficiary might not manage a whole lump sum very well (how fast can an eighteen-year-old blow Rs. 20,00,000? Pretty fast!).It doesn't all need to be income, part of it could be a lump sum. This would be desirable since there can be emergencies that arise that would necessitate having some accessible cash available; and of course there could be some immediate costs that would call for having at least a partial lump sum.
Life insurance is liquid cash -- right when it is needed most! |
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