Why do you need life insurance? Often, for one of these two reasons:
* Income replacement. If your untimely death will cause a severe drop in family income, your heirs may have a need for increased cash flow. Insurance proceeds, invested prudently, can make up for the lost spending power. Insurance to provide such family protection may be crucial while you have minor children or dependents with special needs.
* Estate liquidity. At your death, final expenses ranging from funeral costs to executor’s fees may be steep. You might leave an estate that is subject to tax, as well.
Liquidating assets to raise the necessary cash might not be desirable. Therefore, you may prefer to rely upon life insurance proceeds for such purposes.
If your death would cause no financial hardship and you have ample liquid assets to cover all final expenses, you might not need any life insurance. Consider canceling term life policies. A cash value policy might be exchanged for an annuity, tax-free, to generate income and defer the tax bill.
