Your Money or Your Life Insurance

Purchasing life insurance is probably one of the easiest activities to procrastinate. In fact, many people unfortunately go through some life-altering event before they even think about purchasing life insurance, much less act on it.

For example, you may have recently gotten married, had children or had a health scare, making you think about how your loved ones would fare without you around. Whatever the reasons may be, it's important to distinguish when life insurance makes sense and when it simply does not.

Contrary to what many insurers will tell you, not everyone needs life insurance. In its purest form, life insurance is merely a form of financial protection in the event of your death. You sign a contract to pay premiums to an insurance company, and in return, the company agrees to provide a specified amount of money to your beneficiaries upon your passing.

This financial protection can be particularly comforting when it comes to providing:

• Protection for your family against financial hardship or to maintain their current standard of living.
• Cash to pay off mortgages, taxes or other debts so your heirs are not left with them.
• Funds to pay funeral expenses.
• A continuing income stream for your surviving family members.
• An inheritance for your heirs.
• A nest egg for future expenses such as your children's or grandchildren's education.

As you can see, life insurance is most applicable when you have dependents or heirs who count on you to provide for them. On the other hand, there are plenty of situations where life insurance does not make sense.

If you are single and don't have any dependents, you probably don't need life insurance. A salesman may try to persuade you to purchase a policy by telling you that premiums are lower when you're younger, so it makes sense to lock them in now. They may also tell you that by purchasing a long-term policy now, you will not have to provide evidence of insurability later.