Life insurance protects your family when you die. If you die suddenly, life insurance can cover the funeral and burial costs. Life insurance can provide a temporary income for your family after your death, which gives them time to adjust to what has happened and make other long-term income arrangements. There are some alternatives to life insurance, but if you die suddenly, the alternatives may not give as much protection to your family.
Prepay Funeral Expenses
Today you can arrange your own funeral, pick your burial plot or cremation and prepay these items so that when the time comes, your family does not have to worry about arranging your funeral. Because you made these arrangements, your family knows that your last wishes were met. When you prepay your funeral expenses, you do not need a life insurance policy to cover these costs.
Instead of buying life insurance, you can open a savings account and deposit a set amount there weekly, monthly or at intervals of your choice. When you die, your family has immediate access to the funds in this account to pay for funeral costs and other costs associated with your death. In order for this method to be an effective alternative to life insurance, either you must start saving very early in life or you must save larger amounts to reach the monetary goal you want to have for your family. For example, if you have a $100,000 life insurance policy, you need to determine how long it will take to raise this much money in a savings account. If you expect to have at least 20 years, you would need to save $5,000 per year to make the $100,000. Remember though, if you die before you reach your goal, your family will only have whatever amount you have put away for them. With life insurance, if you buy the policy today, it goes into effect today, and if you die tomorrow, your family gets the whole amount.
Earmark other investments, such as stocks and bonds, as a life insurance alternative. Again, you must determine how much you want your family to have and divide this by the number of years to determine the annual amount you need to put into the investment. Of course, since your investment should earn dividends, you should reach your goal before the time is up.
Another alternative to life insurance is to combine prepaying your funeral expenses with one of the other methods. This way you know if you die suddenly, at least your family will not have to struggle to pay for the funeral costs.
Another method would be to take out a life insurance policy for the amount you want your family to have, such as $100,000. Now begin your savings plan or buy other investments. Once you have reached the goal of $100,000 in the investment, you can drop the life insurance policy in favor of the alternative. This gives your family maximum protection in an uncertain world.
- Legal Assistance Resource Center of CT
- The Guardian Life Insurance Company of America. "Why You're Not Too Young for Life Insurance." Accessed May 14, 2020.
- Nationwide. "Mortgage Protection Insurance: Use Term Life Insurance to Pay Off a Mortgage." Accessed Sept. 17, 2020.
- Federal Trade Commission. "Debts and Deceased Relatives." Accessed Sept. 17, 2020.
- Farmers Insurance. "Life Insurance for Small Business." Accessed Sept. 17, 2020.
- Mass Mutual. "Buying Life Insurance for Your Parents." Accessed Sept. 17, 2020.
- Mutual of Omaha. "Our Solutions for Children's Whole Life Insurance." Accessed Sept. 17, 2020.
- Prudential. "How Can Life Insurance Help Manage Taxes in Retirement?" Accessed Sept. 17, 2020.
- Allstate. "Life Insurance and Retirement." Accessed Sept. 17, 2020.
Liz Jones is a freelance writer with extensive experience in a variety of areas, including digital imaging and the food industry. Jones has been writing professionally for three years. She attended the Pennsylvania State University where she majored in Astro Physics.