The Radical Guide to Life Insurance: Should you buy life insurance?

The most important reason consumers buy life insurance is to care for their loved ones. You want to make sure that your beneficiaries have sufficient funds to adjust to life in the event you pass away. To this end, you must keep the following issues in mind when choosing a life insurance policy:

• Support your beneficiaries. Aside from having to recover emotionally from your passing, your spouse, children, elderly parents, relatives or friends (whoever might be your beneficiary or beneficiaries) will have to replace at least a portion of the economic value you contributed to their lives. Be sure to consider both those who benefit from your direct financial contribution as well as those who rely on your non-monetary contributions which might have to be covered by a paid provider i.e. a cleaning service and / or day care.

• Replacement income. In order to soften the blow of your passing, you want to provide for certain immediate needs falling into the following categories: (a) living expenses -- including mortgage payments, bills, and childcare; (b) education funds -- assuring your beneficiaries' educations are paid for; and (c) retirement funds -- making sure there are adequate funds available for your retired or retiring beneficiary or beneficiaries.

• Final expenses. Life insurance assures that any funeral expenses, unpaid hospital bills, debts, and estate and inheritance taxes are paid for. The last thing you want to do is saddle your beneficiaries with a whole host of expenses they hadn't planned for. If funeral expenses are your only concern, keep the following in mind. According to a recent study, the average funeral in the United States costs approximately $6,000. You might want to allot 10 - 20% more in order to cover any unanticipated additional funeral related costs. If you have family that would like to honor you, your life insurance coverage will allow them the opportunity to provide a proper burial.

• A solid investment. Some insurance agents promote life insurance as a solid investment decision. Buying certain forms of life insurance allows you to contribute some of your income to a savings program. Not only that, some policies provide an opportunity to grow your capital using a variety of investment tools ranging from stocks and bonds to mutual funds and index funds. We will discuss the merits of these options in a later section.

• Insuring a business. If you are a business owner, you might consider buying life insurance to assure your business remains a going concern even after your death. The business might also provide a stream of income to your beneficiaries. So keeping the business alive might make sense from a variety of perspectives.

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