Monday, January 11, 2010

Who needs Life insurance?

If someone suffers financially when you pass away, chances are you will need life insurance. Life insurance provides cash to family after death occurs. This cash (known as death benefit) replaces your income and can help your family meet many important financial needs like funeral costs, daily living expense and college funding for childrens.

Most Singaporeans need life insurance. To figure out if you need life insurance, think through the worst-case scenario. If death is going to occur tomorrow, how would your loved ones fare financially?

Would they have the money to pay for your final expense (e.g., funeral costs, medical bills, debts, lawyers’ fee, etc.)? Would they be able to meet outing living expense like the rent or mortgage, food, clothing, transportation costs, healthcare, etc?

What about long-term financial goals? Without your contribution to the household, would your surviving spouse be able to save enough money to put the children through college or retire comfortably?

The truth is, it is always a struggle when you lose someone you love. But your emotional struggles don’t need to be compounded by financial difficulties. Life insurance helps make sure that the people you care about will be provided financially, even if you’re not there to care for them yourself.

To help you understand how life insurance might apply to your particular situation, a number of different scenarios have been outlined below. So whether you’re young or old, married or single, have children or don’t. Take a moment to consider how life insurance might fit into your financial plans.

You’re Married
Everything is being shared with your significant other when you are married, including your financial obligations. Many people have the belief that they don’t need to think or have life insurance until they have children. But that is not true. What if death is going to occur tomorrow? Even with the surviving spouse’s income, would that person be able to pay off debts like credit-card balances and car loans, let alone cover the monthly rent and utility bills.

You’re Married With Kids
For most families, they depend on two incomes to make ends meet. If death is going to occur suddenly if one, could your family maintain their standard of living on your spouse’s income alone? Probably not. Life insurance makes sure that your plans for the future don’t die when death occurs. Would you want to rob your children the opportunity to study because they have to quit school to work just to earn income to support the family?

You’re a Single Parent
You’re the caregiver, breadwinner, cook, chauffeur, so much more as a single parent. With so much responsibility resting on your shoulders, you need to make doubly sure that there is enough life insurance to safeguard your children’s financial future.

You’re a Housewife
It does not mean you don’t make financial contribution to the family just because you don’t earn a salary. Childcare, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Could your spouse afford to pay someone for these services? With life insurance, your family can afford to make the choice that best preserves their quality of life.

You Have Grown Children
You may feel the need for life insurance has passed as the years go by. Just because your kids are through University and the mortgage is paid off does not mean that your savings and CPF will take care of whatever lies ahead. If death occurs today, your spouse will still be faced with daily living expense.

What if your spouses outlives you by 10, or maybe 30 years, which is certainly possible today with the advancement of medical technology. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle your worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?

You’re a Small Business Owner
Life insurance can also protect your business apart from taking care of your family. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, pass away tomorrow? With Life insurance policy, it can be structured to fund a “buy-sell” agreement to ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price.

That way, the owners get the business and the family gets the money, a win-win situation. To protect a business in case of the death of a key employee, “key-man insurance”, payable to the company, provides the owners the financial flexibility needed to either hire a replacement or work out an alternative arrangement.

You’re Single
There are exceptions that single people need life insurance, for instance, some single people provided financial support for aging parents or siblings. Others might be carrying significant debts that they wouldn’t want to pass on to family members who survive them.

Insurability is another reason to consider life insurance when you’re single. If you’re young, healthy and have a good family health history, your insurability is at its peak and you will be rewarded with the best rate on life insurance. Locking in coverage when you’re young and single make sense if you anticipate a need for life insurance down the road and you can fit the premiums into your budget. Doing so can eliminate the worry of having to qualify for coverage when you’re older and maybe not as healthy as you once were.

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