Life Insurance

Life insurance has many uses, but its main use is to provide income for a dependent or a family as a result of the premature death of the primary wage earner Since most life insurance is sold to protect against the risk of premature death, the fear that survivors would suffer a loss of income and have debts to settle is the most important concern for purchasers of insurance. Over time, it is possible that needs may change. If a person made an insurance arrangement years ago, he or she should reevaluate the policy periodically. Some triggers for reevaluation are:

• Marriage
• Birth of a child
• Purchasing a house
• Planning for children's education
• Children leaving home
• Beginning a business
• Planning for retirement

If the family is left without sufficient money to meet basic living needs or to prepare for future goals, they will have a financial crisis to cope with during a time of grief. Families with young children have a clear need for life insurance. If both spouses work, the loss of one income may cause the family immediate economic hardship and make it more difficult to realize future goals such as paying for the children's education.

A single person or a married person with no children may think that he or she does not need life insurance because no children are dependent on a parent's income. However, the individual needs to consider a partner or surviving family members' financial needs to cover the costs associated with his or her death. Life insurance basically comes in two forms.

• One type pays only a death benefit-a specified sum of money-to the person or persons designated if death occurs within a specified period or "term." This is an immediate benefit on the occasion of death and for a certain amount of years after death.
• The other, more permanent type comes with an additional feature that builds tax-deferred savings called "cash value." The cash value is the reason many individuals purchase life insurance policies because this is a benefit that the policyholder can enjoy and use during his or her lifetime. The cash value can help fund college, the purchase of a home, or a retirement.