NEW YORK, February 21, 2022 (Newswire.com) - When thinking about a financial plan, it's easy to jump right to investments. While investments are an important part of a financial plan, a solid plan will usually include a range of options that can help one reach their goals in good times and if life throws a curveball or two.
Life insurance can help protect a plan. Here are five reasons to include life insurance in a financial plan for anyone who has yet to find the right life insurance policy.
Provide Peace of Mind
A financial plan is a roadmap that's used to help one reach your goals in life. Incorporating a life insurance policy into a financial plan provides peace of mind for all parties involved: the policyholder and the loved ones who would benefit from it. This peace of mind can give the confidence to move forward with financial choices knowing that they're in line with a larger vision.
After someone passes away, the proceeds from life insurance can replace that person's income. Especially if someone is the primary breadwinner, income replacement is a huge benefit of the right life insurance policy. But it's just as critical to have life insurance for someone taking on key jobs in the household, like childcare, which would require money if they were no longer managed at home.
Take Care of Final Expenses
After someone passes away, there are certain things to pay for, like funeral costs or estate taxes, that are captured in the bucket of final expenses. The right life insurance policy can help pay for those final expenses, meaning loved ones are free to use their inheritance for other purposes.
Settle Outstanding Debts
For many households, the largest expense is the mortgage. But without one spouse's income, the family may not be able to make ends meet. With an appropriately sized term life insurance policy, a surviving spouse can pay off lingering debts, like a mortgage or business loan, without worry.
Fund College Expenses
For parents, there's likely a line item in the financial plan for children's education expenses. But that plan could change dramatically if the family lost one parent's income. Life insurance can help bridge that gap if the death benefit is enough to cover the cost of education.
The general recommendation for a death benefit payout on life insurance is 10 to 12 times income. But families with many children may need to bump up the amount if the goal is to use the policy to cover education expenses.
The Bottom Line
Every well-rounded financial plan should have life insurance included. Reasons like giving loved ones peace of mind and providing income replacement and other financial support top the list of why it's necessary to have life insurance in the plan. Taking time to find and secure the right life insurance policy today means long-term financial plans are protected if life offers up an unexpected situation.
Source: Northwestern Mutual