Life insurance can be a valuable estate planning tool. An insurance policy allows you to provide for your family after you’re gone, making funds available to cover short-term expenses, paying for your loved ones’ long-term needs, and leaving an inheritance for your children.
But, do you really need it? Not everyone does, and the answer depends in large part on your financial situation and the size and needs of your family. Here are some factors to consider:
- Do you have dependents? Especially for parents of young children, life insurance can be essential. But, even if you don’t have children, life insurance can help you continue to provide for loved ones after you’ve passed away. For instance, if you have other family members or close friends who rely on you for financial assistance, you might want to purchase a life insurance policy.
- Are you a stay-at-home parent? Even if you don’t work outside the home, if you and your spouse have young children, you should consider buying life insurance. Think about all the things you do for your family each day; from caring for children, to shopping and cooking; to cleaning and maintaining the house – and more. If you were to pass away, how much would it cost to hire someone to cover even the most basic of these tasks?
- What are your loved ones’ other sources of income? If you have enough savings, investment income, or other property to provide for your family, then you may not need life insurance – or at least not a large policy.
- Will you need a policy to pay for your funeral? If you’re single and have no dependents – and don’t anticipate having sufficient savings, the most important use of life insurance could be to pay for your funeral expenses. If this is the case, you may want to purchase a small policy.
An estate planning attorney can help you determine how life insurance fits into your overall estate plan.