Uses of Life Insurance

The primary function of life insurance is to provide financial protection to your family in the event of your death. Without life insurance, if you die, you are likely to leave your family with a financial burden as a result of your lost income. Beyond that, there are other functions of life insurance. Life Insurance Info examines both personal and business uses below; visit the Advanced Life Insurance Topics page for additional uses.

Get a free life insurance quote

PERSONAL USES FOR LIFE INSURANCE

Your main objective for a life insurance policy is to provide a means for your family to meet financial obligations after your death. The following lists some of the major expenses as well as other personal uses for life insurance:

• Funeral expenses – the insurance payout can help with the cost of a funeral
• Medical bills – if you need a lot of medical attention prior to your death, there are likely to be outstanding bills
• Mortgage or rent payments – your family may be financially strapped without your income; the insurance payout would assist with monthly living expenses
• Income replacement – your dependents will need another source of income when yours is no longer available
• Estate planning – for those with assets in excess of $2 million, the life insurance payout allows beneficiaries to pay off the costly estate taxes
• Charity/donation – perhaps you want to leave your death benefit to a church, alumni association, or favorite charity
• Outstanding debts – there may be additional debts following your death that the death benefit can pay for
• Loan – a policy that builds cash value can be borrowed against for short term debts

LIFE INSURANCE FOR BUSINESS PURPOSES

Similar to personal reasons, business owners can also use the proceeds of a life insurance policy to protect a businessfinancially, including:

• Business continuation – assists with transitioning a business from owner to family members, ensuring that the business continues to operate even after your death
• “Key person” – a policy is purchased on the life of your businesses’ key employee; the payout allows the business to find a replacement
• Employee bonus – provides a tax-deductible benefit to valuable employees