What's the Purpose of Life Insurance?
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What can life insurance be used for?
The reasons to have a life insurance policy are different for every individual. Here are some of the most common reasons:
- Burial expenses: Life insurance policies can be purchased as burial policies so that the death benefit can be paid directly to a funeral home for the purpose of burial and funeral expenses.
- Debt repayment: If you leave your spouse with a mortgage, car payments, and other bills that once required your income to pay, then a life insurance policy can help them pay these debts off after your death and after the loss of your income.
- Salary continuance: Most families need the income of each working spouse in order to live comfortably. When one spouse dies, that can put the family in dire financial straits, but a life insurance death benefit can provide the life support they need.
- Estate tax issues: Some large estates may face estate tax consequences after the death of the head of the household. A life insurance policy death benefit (which is federal estate tax exempt) can be used to pay off those taxes to help keep the family's accumulated wealth in the same investments.
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