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Life Insurance Part 1: Do you need it?

Updated: Oct 11, 2023

One of the more common topics we discuss with clients is life insurance. It's an emotionally complicated subject for many, so we help clients sort through the decision objectively and identify any potential weak points.

Life insurance provides valuable financial protection for many people, but it is not a necessity for everyone. Whether or not you need life insurance depends on your individual circumstances and financial responsibilities.

Here are some factors to consider:

  • Dependents: If you have dependents such as a spouse, children, elderly parents, or other family members who rely on your income to meet their financial needs, life insurance can provide a safety net in case of your untimely death. It can help ensure that your loved ones are not burdened with financial difficulties in your absence.

  • Income Replacement: If your income contributes significantly to your household's financial well-being, life insurance can serve as a replacement for that income, helping your family maintain their standard of living.

  • Business Obligations: If you are a business owner or have a business partner, life insurance can be crucial to ensure the continuity of the business and provide funds for buyouts or transfers of ownership in the event of your death.

  • Final Expenses: Life insurance can be used to cover funeral and burial expenses, which can be a considerable financial burden for your family.

  • Legacy: Life insurance can provide your heirs with a tax-free lump sum. Many other assets/accounts have tax implications when inherited or distributed. Life insurance proceeds are tax-free, keeping the tax situation clean.

If you don’t have dependents reliant on your income, have ample savings and assets to cover any financial obligations, or have sufficient resources to leave behind for loved ones then a you probably don't need life insurance. Additionally, people with certain medical conditions may find it challenging to obtain affordable life insurance coverage.

Ultimately, the need for life insurance varies from person to person. A salesperson will be happy to sell you on all the benefits of a policy, but if you don’t have one of the reasons listed above then a life insurance policy isn’t right for you.

Next post I’ll start discussing the types of life insurance and what I like for clients.

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