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What are the purposes of Life Insurance?
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Ohio Life Insurance What Are The Purposes

So you’re curious about the uses of Life Insurance… perhaps you’ve heard friends or co-workers talking about an incredible investment opportunity that utilizes a life insurance product to minimize tax consequences.

Not so fast.

At the most fundamental level, Life Insurance provides a specified sum of money, often referred to as the death benefit, to your beneficiaries in the event of your death.

While there are numerous, and very complex, life insurance options, most consumers working with a specific budget tend to be more interested in protecting the financial future of their loved ones in case something happens to them.

Tip. Make sure those who depend on you, especially from a financial perspective, are adequately protected in the event of your death before you start considering a highly complex investment strategy that utilizes life insurance products.

Too often, consumers are so focused on the idea of creating wealth with life insurance products that they lose sight of its original purpose:  to provide financial protection for your loved ones.  Start by making sure the amount of life insurance coverage you have is enough to accomplish this goal.

Beyond the Basics

Perhaps you’re in a situation where Life insurance is far more than just a decision of how much to buy. Depending on your financial situation, life insurance can be used for a variety of purposes, such as:

    • Estate planning
    • Accumulating cash
    • Transferring wealth
    • Achieving estate tax liquidity.

Life insurance is like auto insurance in that you can buy a lot, or not much at all. On the other hand, life insurance differs from auto insurance in that, depending on the type of policy you buy, you can pay a lot or a little for basically the same death benefit.

Keep in mind, the younger and healthier you are, the less you will pay for coverage. Life insurers really like to have their policyholders around for a long, long time.

Tip. So how much life insurance do you need? It depends. One common benchmark is your death benefit should be about six to eight times your annual earnings, but there are a variety of factors to consider:

    • Other income sources
    • The size of your family
    • Whether your spouse works and his or her earning capacity now and in the future
    • The number of people who are financially dependent on you and for how long
    • The death benefits your family will receive from Social Security and any life insurance plan at your place of employment
    • And any special needs such as mortgages, college education funds and estate planning

If you’re feeling overwhelmed, you’re not alone.  The life insurance world can be hugely complex, and trying to navigate this market on your own can leave your head spinning.  Instead of trying to determine what type of policy you need, how much is enough and which insurance company is best for you, start by finding a licensed insurance advisor that you can trust.  The right advisor can guide you through this entire process.

If you’d like to learn more, contact one of our Licensed Advisors or complete the form on this page.  We’re here to help.

To continue learning about your insurance protection, return to our Resource Center.

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