Life Insurance: Is it Right for You?

Although life insurance is neither an investment plan nor a savings plan, it still plays an important role in the financial portfolio of most people. The main purpose of life insurance is to protect a person's dependents from financial losses in case of death.

Financial obligations arise from many situations in life, such as getting married or divorced, having a baby, buying a house, sending your child to college, starting a business, looking after a parent who is old or sick or retiring. If a person assumes these responsibilities, he must ensure that these obligations continue to be fulfilled even after his death. If you have a family that depends on your earning capacity, it is a perfect candidate for life insurance. A person should consider long-term, as well as short-term financial obligations, to decide if he needs life insurance. The questions to ask are:

1. Do you have people that include family members and business partners who are financially dependent on you for a long period of time?

2. In the case of your death, do your dependents have sufficient assets and resources, including cash to cover all their needs and pay their financial debts?

The second question requires an additional assessment of the short-term financial needs of the family of the deceased. These include the elaboration of the following factors:

The inheritance procedures can take a long time and the family will need funds until they have access to the property of the deceased.

The availability of other liquid assets such as bank accounts or stocks can reduce dependence on life insurance.

The existence of a large amount of non liquid assets against liquid assets makes it necessary to have insurance.

The amount of debts and taxes that the person owes after his death.

Businessmen must ensure that there is sufficient cash flow in the business so that their heirs can maintain their business.

Given the above questions, one might find that most people do need life insurance, although you can do without it if you do not have dependents or young children to support. However, other obligations such as a home mortgage or an exclusively owned business or planning for a comfortable retirement for you or your spouse are some of the reasons why life insurance is still a good financial program to obtain.