Common Uses of Term Life Insurance By Dennis Jarvis At Isnare.com Ezine Articles

We are often told we need to get life insurance and we always have a sense of the need for it but what exactly can the benefits of term life insurance be used for? People know they need it but not always what they need it for. Let's take a look at some of the common uses for term life insurance coverage.

First, we'll start with some of the big ticket items. Unless you are independently wealthy (in which case, you're probably at the wrong website), you're like most Americans in that after a few month's of no income, you would be underwater financially. Really think about how long your family could go if a primary income suddenly disappeared. Most people have some assets but these would quickly be wiped out if a major source of income were to vanish. This is a key use of term life insurance...to replace missing income. This is also why the amounts of term life insurance tend be big numbers. It takes a lot of money to cover years or decades of lost income. You can use our term life planner to evaluate what an ideal amount is.

Somewhat connected but from a different angle is the use or need to pay off large debts such as a mortgage. To some extent, you could tie this in with the income loss since you would usually pay off the mortgage over decades with that income but there's the added value that a paid off asset has value, can be sold, or borrowed against.

Uses involving a business are also a viable application of term life insurance. If the deceased was a partner in a business, the term life benefits may allow the insurance beneficiary to buy out partners to take control of the company. The term life benefit could also pay off business debts or allow the time to find a replacement. This is sometimes called a key-person policy but from a different angle.

Final expenses are a commonly unforeseen if not as big use of term life insurance. Final expense can involve those incidental expenses associated with the passing of the person. This could include funeral, travel expense, family related costs, and many others. These expenses can quickly add up to 10's of thousands of dollars. It can also include debts (personal or not) that the deceased had at the time of death. Debts to family members which can be very contentious.

The government doesn't just tax the living. There can be significant taxes under the delightful heading of death taxes on both a federal and state basis. Not only are life insurance benefits usually not subject to death taxes, but they can be used to pay off other taxes for assets that are unfortunately not shrouded in the tax protective shield of term life insurance.

These are some of the key uses of life insurance and due to the affordable cost of term life insurance, it's very inexpensive to cover all of these needs.

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