Life insurance can protect your family by providing them with an income tax-free benefit at the time of your death. This can help your loved ones cover both the short-term costs associated with your death and the long-term costs that your income would otherwise have helped them meet. Today, we’ll discuss five major expenses that you should consider as you think about your need for life insurance coverage.
1. End-of-Life Expenses
The most common use of a life insurance policy is to cover funeral and burial costs. While these expenses might not be the foremost in your mind, they can be substantial. According to the National Funeral Directors Association, a funeral with viewing and burial often costs the family more than $9,000. Providing funds for your final arrangements frees your family from the financial burden of planning your funeral and allows them to focus on how they would like to honor your memory.
If you die before your home is paid off, a life insurance policy can help your partner make ongoing mortgage payments without your income. Many people choose to purchase policies that cover the initial purchase price of their homes. This can allow surviving family members to buy the property outright, relieving them of the burden of making a mortgage payment every month while allowing them to remain in the home.
3. Monthly Bills and Everyday Expenses
Of course, the mortgage isn’t the only recurring cost your loved ones would have to cover in the event of your death. Depending on how much your family relies on your income to meet household expenses, they may struggle to make any rent or car payments, pay utility bills, and keep stocked up on groceries in your absence. A life insurance policy can give your family a financial cushion to help pay those expenses while they build their financial independence.
4. Co-Signed Debts
When you die, most of your debts don’t die with you. If anyone has co-signed on a loan with you, the co-signer will be liable for paying off the outstanding balance. Even if you do not have a co-signer, your estate will be responsible for your debt. This reduces the amount of assets that can be passed on to your loved ones and, in some cases, can leave them on the hook for balances that your estate can’t cover. Consider any credit card debt, car loans, and private student loans you have when determining how much life insurance coverage you need. The laws of your state will determine how much of this debt will automatically become your spouse’s responsibility in the event of your death.
5. Child-Related Costs
Whether you’re a family breadwinner or a stay-at-home parent, your contribution is critical. If only one of you is left to care for young children and earn an income for the family, they will need some help. Life insurance can provide funds for quality child care to help your spouse and your children through the difficult transitions they will need to make. When your children reach college age, your life insurance benefit can help them meet the increasing costs of higher education.
Life insurance coverage is an important part of taking care of your family. Even if you can’t be with them as long as you’d like, you can ensure that they have what they need after you’re gone. ELCO Mutual is committed to providing personalized service, and our agents are happy to answer any questions you may have about our policies. For more information, browse our free online resources or subscribe to our blog. Additionally, download our free ebook to uncover the truth behind eight myths you may have heard about life insurance.