Should You Consider Buying Life Insurance?
By Dr. Napat Jatusripitak
In a world where there are already so many insurance products, you might wonder why you should care about life insurance. Because every time we think about a new insurance product, endless questions would ensue. Do I need life insurance if I already have health insurance? Ultimately, who should consider life insurance?
The short answer is everybody who has dependents.
From my article “The Big Picture: Life Insurance Explained,” we buy life insurance to protect our loved ones in the event that something were to happen to us.
This means that how much we need life insurance depends on where we are in life. Typically, our need is low when we are young (we are the dependents) but high as soon as we start a family (we expect to have dependents). This need then decline as we age into the golden years.
Keep in mind that the level of need also varies with the type of household and the amount of money to maintain the lifestyle of our designated beneficiary. A household in which only one person earns income to support not only the spouse but also the children and the grandparents would have a much greater need than a household with two working partners without a child or an elderly.
Now what if you’ve got enough savings to self-insure your entire family? Would it still make sense to consider life insurance? Believe it or not, international surveys find that the rich still purchase life insurance policies for two main reasons.
First, the benefit paid to your beneficiary may be income tax-free in some countries.
Second, life insurance benefits offer superior liquidity compared to other assets such as land. Your designated beneficiary won't have to worry about splitting and selling the illiquid assets among the siblings in a difficult time to maintain the same lifestyle.
Not all of these scenarios will fit your needs exactly. Everyone is different! But I hope that this article gets you thinking about how life insurance can fit into your financial planning.