Why we chose life insurance

Why we chose life insurance

I’ve always been a little skeptical about purchasing life insurance. The reasons not to were convincing to me for a long time:

1. Why spend money that I may not ever get back when I could be using it now? This is the “hedging your bets” argument.
2. If I were to die, shouldn’t my extended family and friends come around my immediate family to take care of them?
3. Once my family does get the death benefit, won’t 99.9% of it go to taxes anyway?

But, despite these reasons, we decided to finally purchase life insurance for two important reasons:

1. Family income: We realized that even though tax must be paid on interest income, the money from life insurance provides vital supplementary income for daily living, college education, and other big expenses such as purchasing a home so that family can be a bit more stable. (I did learn that life insurance proceeds are NOT subject to Federal Income Tax).
2. As an investment: There are some policies out there—such as cash value life insurance—that allow money to grow over time, while simultaneously providing a death benefit in the event of death. There are reasons to invest in traditional accounts—IRAs, 401Ks, etc.—but we felt we had exhausted these enough that we needed another investment vehicle. In other words, we were going to invest anyway; why not allow it to also provide a death benefit?

Why are you choosing to purchase life insurance? Why not?

Guest Blogger: AJ