Life insurance typically is used to provide replacement income for those who depend on you – spouses, children, or others. Here are three ways replacement income from your life insurance policy can help your dependents:
Funeral costs and estate taxes
When you die, you may leave taxes due or other end-of-life costs, such as funeral expenses. For example, the most recent information from the National Funeral Directors Association pegs the national median cost of a funeral with viewing and burial at $7,181 – and that doesn’t include additional costs such as monuments or markers, flowers, or published obituaries. A life-insurance policy can be used to cover these expenses, freeing your loved ones from paying for funeral and final estate costs.
Higher education costs
Perhaps you have children who have not yet attended college. Or perhaps your children are already in college or recently graduated, in which case they may have tuition costs or student loans outstanding. In these cases, your life insurance proceeds could be used to finance your children’s college education or to pay off their education-related debts.
The population is aging: In 2014, the latest year for which data is available, 14.5% of the U.S. population (some 46.2 million Americans) was 65 years of age or older. By 2040, the population of seniors is expected to grow to 21.7% of the population. As we age, we get ill, and many of us will suffer prolonged illnesses prior to death. We may need extended-care facilities, which can be costly. Consider giving your loved ones the gift of not worrying about medical or extended-care bills that may come due after your death by earmarking your life insurance policy to cover such costs.