Who should buy Life Insurance?
1. Homebuyers and Property Owners (Couples) 🏠
Function 1: To continue the dream of young families to own a home
Imagine a young couple in their twenties who are working hard to purchase their dream home for $6 million and have saved up for the down payment. However, if one of them passes away suddenly due to an accident or serious illness, their plan to settle down in their dream home will be hindered. With only one income left, realizing their dream of owning a home may become impossible.
But if the deceased partner had purchased sufficient life insurance coverage, the death benefit from the policy can provide partial funding for their surviving spouse’s dream of owning a home. For single-income households where one partner needs to stay home to take care of the baby, this emergency money is especially important.
In addition, many couples in their 40s have become homeowners but still have a large mortgage loan to repay, requiring both incomes to cover the payments. If one of them passes away, the surviving partner may not only have to cope with the loss of their loved one but also experience financial difficulties in repaying the mortgage, making their life more difficult.
2. Young Families 👪
Function 2: To prepare for the life and education of young children
Life insurance coverage is also important for single-parent households with young children. If the deceased partner had purchased sufficient life insurance coverage and designated their spouse as the beneficiary, the surviving spouse can use the death benefit to repay the mortgage, without sacrificing time spent caring for their young children due to financial pressure.
In addition, the surviving spouse can also use part of the insurance proceeds to establish a trust account to cover their children’s future education expenses. In other words, the death benefit from the policy can establish a financial safety net for the deceased’s spouse and children, allowing the family to have more resources to face adversity.
3. Who need to Support their Parents 👴👵
Function 3: To provide timely protection for parents’ retirement
When a young person who needs to support their parents passes away prematurely, their parents may face financial difficulties, and government assistance or welfare programs may not provide a sufficient safety net for their retirement. In this case, the death benefit from a life insurance policy can provide a “godsend” for them.
A couple in their 50s who have mostly paid off their initial mortgage and have the ability to make future payments, may consider their main asset to be their home. If they are experienced investors, they may also have stocks, mutual funds, or participate in retirement income plans (such as a mandatory provident fund).
Couples who prefer investing in the real estate market may take out another mortgage to purchase another property or apartment. For those who pursue diversified investments, they may open a stock account with a licensed broker or invest in the stock market through life insurance policies and annuity contracts, combining the accumulated income from insurance policies or annuities with retirement benefits from other retirement plans to enjoy their retirement years in a self-sufficient manner.
For individuals aged 60 or above, their children may have already grown up and their focus may not necessarily be on providing financial protection for their family in case of their premature death. Instead, they may want to help their grandchildren with their educational expenses. In this case, they can designate their grandchildren as beneficiaries of their life insurance policy, allowing them to directly benefit without incurring additional fees such as trust account management fees.
In addition, estate planning is also an important issue. How can one effectively pass on their accumulated wealth to the next generation in a fair and efficient manner? If the jurisdiction in which they reside requires payment of inheritance or estate taxes, estate planning becomes even more important. If they do not want a large portion of their estate to be eroded by government taxes, they can use life insurance to pay for inheritance or estate taxes, allowing them to leave their entire estate to their loved ones.
From the examples above, it is clear that life insurance is a risk management tool suitable for all age groups, and is a necessity rather than a luxury.
No one can stop time and stay forever in their 30s with robust health. As we age, our health will inevitably deteriorate, and accidents can happen to anyone regardless of age.
If one misses the opportunity to purchase life insurance during their peak physical condition in their younger years, and only buys it when they are older, they may be classified by the insurance company as having a standard or below-standard health level, and may be forced to pay higher premiums.
