Providing replacement income for your dependents
If people depend on your income, life insurance can replace your income for them if you die prematurely. A common example of this scenario is parents with young children. This also applies to couples for which the survivor would have financial difficulties if they no longer had the income of their partner.
To pay your final expenses
Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
Create an inheritance for your heirs
Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
Pay federal and state Death Taxes
Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance.
Create Savings for your Spouse or Family Members
Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).
Protect your business
Life insurance for business may be taken out for several different purposes. One purpose is to provide for the successful liquidation of your financial interest in the business for the benefit of your heirs. If you have a business partner, you should each have a life insurance policy, enabling an automatic buyout of the interest of the deceased. It protects the estate of the deceased, and ensures the continuation of the business.