1. Cover Final Expenses and Funeral Costs
The cost of a funeral today is a lot more than you might expect. When a spouse or child passes away, the last thing you want to think about is how you will pay the funeral home’s bill. According to the National Funeral Directors Association, the average funeral cost is around $6,500 – and that does not include burial fees, plot, or headstone.
2. Finance Your Child’s Education
Not going to college was never an option for me. And it would have been more challenging without my parents assistance. You need to ask yourself, “Is my kid going to a state school like UT or A&M where tuition is approaching $10,000/year or will they attend Vanderbilt
where tuition is upwards of $60,000/year?” In the event of your death it’s nice to know your children’s education is taken care of.
3. Replace Your Income
Your most important asset is your ability to produce income. You insure your house and your car, why not your life? Think about the things your salary pays for and how losing your income will affect your family. The general rule of thumb is to multiply your annual salary by 10.
4. Pay Off Debts and Estate Taxes
If you were to pass, who is going to take over that mortgage payment? Or the car notes? Or the remainder of your student loan? Also who is going to take care of your estate taxes when you die? In the wake of your death, making sure these things will be taken care of and not dumping the financial responsibility on your spouse provides you peace of mind.
5. For Love
My father, Barry Rochkind, LUTCF, once told me that people get life insurance for two reasons: “You love somebody or you owe somebody.” This makes a lot of sense since you don’t always get life insurance for yourself (outside of peace of mind). You buy life insurance for your loved ones. Sure, you won’t be able to use that death benefit, so what do you care? The worst thing that could happen is that your legacy is leaving your family in financial distress.