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Life Insurance Goals Have Changed with the Economy

The recession that began in 2009 and continues to plague the economy of this nation and the world today has shifted the perspective on life insurance. The necessity for the coverage and the specific goals the benefits are intended to address have changed markedly. Traditionally, the assumption has been that young couples take out life insurance to protect their children and surviving spouse in the event of their untimely death. The benefits were intended to cover lost wages and to go toward educational costs and the like. Those are still valid goals, however, if you no longer have young children your life insurance may well protect your adult offspring at a completely different phase of your life and theirs.

Changed Character of Debt in the U.S.

The generation of parents who gave birth to the Baby Boomers were more cautiously prosperous, coming out of World War II, building homes and businesses with GI Loans. They lived within their means, worked hard, and saved for their old age. Their children and grandchildren, however, have regarded home equity as just another line of credit — one of many, in fact. They’ve drawn on their existing homes as a source to fund loans for other projects or to “trade up” to even larger and more expensive homes, all the while accruing credit card debt.

Basically, when these people die, their children are going to inherit debts they may not be able to pay, especially with so many homes “upside down” on their mortgages. Simply put, the owners owe more than they can now gain from selling the residence. Under normal circumstances, the heirs would sell the home as the major asset and use the proceeds to settle the estate’s debts. That, however, is no longer a given. With a life insurance policy in place, you could be protecting your children’s hard won assets from your own questionable decisions.

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Caring for Surviving Spouses and Meeting Burial Costs

There is also the fact that with improved medical care, it’s not uncommon for one spouse to survive another by a decade or more. Assisted living facilities and other long-term care expenses to maintain quality of life and independence are not inexpensive. Life insurance allows the policy holder to continue to care for their spouse years beyond their own death.

And, death itself is not cheap in this country either. Funerals cost thousands of dollars and cremations are only marginally less. In circumstances of deep grief, and out of a desire to honor the departed, family members often spend beyond their means on these final expenses. If nothing else, a well-maintained life insurance policy will pay for burial costs and give your family the closure these ceremonies are intended to impart.

Deciding the amount of your life insurance cover can be a difficult equation. Some experts say the smallest figure to even consider is $1 million. Often that is a decision best made with the help of a financial planner who can calculate the price of what you regard as your standard of living and how that is likely to adjust for inflation in the future. Regardless, however, life insurance is not a type of coverage that should be discarded as a needless expense when it could be your most useful legacy to your spouse and heirs.

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