The death of a family’s primary breadwinner not only brings emotional stress on a family, but also financial strain. Life insurance helps fund family situations, at the time when losing a breadwinner’s steady stream of income becomes reality for those left behind.
For the surviving family members, they may experience difficulties paying for funeral expenses, covering the cost of daily living expenses, paying back current loans or mortgages and funding any other future financial obligations.
Fortunately, a life insurance policy can be set-up to help cover these future financial obligations that may arise, if the insured dies prematurely. Every life insurance policy carries a death benefit that is predetermined by the insured and the insurer and should be five to 10 times the insured’s annual salary.
In some situations, the death benefit can be paid within a few days of the claim being filed and is, therefore, an excellent source of immediate cash flow to the surviving family members.
Below is a brief list of family situations that could benefit from an insured’s life insurance proceeds:
This is only an abbreviated list as life insurance can help fund an infinite list of financial obligations.
Daily Living Expenses
Surviving family members will be faced with the financial demands of carrying out their daily routine while meeting the needs of household members after the passing of the insured. This may involve cutting back on non-essential expenses – such as cable TV, magazines subscriptions and gym memberships – for a short period of time or indefinitely.
Everyday expenses include food, utilities, transportation, clothing and also includes mortgages payments, credit bills and any outstanding loans. It is essential to have the appropriate amount of funds to cover these expenses, which life insurance can help cover.
Final Expenses
There are certain expenses associated with losing a loved one that life insurance can help pay for such as burial or cremation expenses as well as memorial and funeral services.
Final expenses can also include any outstanding medical bills, rehabilitative treatments, court fees that may be associated with the insured’s estate, any outstanding debts or loans and any other pending fees.
An insured’s life insurance policy can be set up to help cover all of these final expenses to help ease the burden for the surviving family members.
Emergency Funds
Accidents and natural disasters can happen at any time and can range from a minor accident to a life altering situation. The important thing to note is that surviving family members need to have a source of immediate cash funds in case something were to happen to them.
Educational Needs
One major life event an insured’s life insurance policy can help pay for educational needs. Often times it is used for the insured’s children so they can continue their education uninterrupted and even continue towards higher education. However, it can also be used to fund the surviving spouse’s educational needs, if they desire to go back to school.
Charitable Donations
While life insurance is often used to pay for future financial obligations, the proceeds can also be used to increase the value of gifts to the insured’s favorite charity. This can be done by either giving the entire policy to a charitable organization or by naming the charity as a beneficiary on the insured’s policy.
Want to learn more about life insurance? Read our article The Most Frequently Asked Life Insurance Questions.