The most basic purpose of a life insurance policy is protect your dependents financially in the event of your death. If you have a significant amount of liquid assets or have money invested in the stock market, you may wonder why it would be necessary to also have a life insurance policy. While an increase in income or savings may change the amount of coverage that you may need, it will rarely negate the necessity of life insurance.
How much does your family need?
If you were suddenly no longer around to provide for your family, how much money would be enough for them to maintain their current standard of living for the next few years? You would need that amount and more in liquid assets to justify discontinuing a life insurance policy.
Taking a risk
Investing, by its very nature, is risky. While your stocks may have been successful in the past, a turn in the market or a government action can change all of that. With a life insurance policy, your dependents will have a guaranteed amount of money to receive. They will not have to deal with the stress of depending on a variable market.
Financial planning is multi-layered
In addition to a life insurance policy with a sufficient amount of coverage, you should have funds in savings accounts and in stocks and mutual funds.
This post was originally done by Richard Reich.
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