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What should you know about life insurance?

Perhaps the first thing to understand about life insurance is that it's probably a good idea. No matter where you are in life -- or how you currently manage your finances -- life insurance can provide some protection for those you might leave behind if tragedy strikes. Even if you don't have children or other heirs, a life insurance plan ensures no one is left on the hook for funeral or burial costs and helps estate administrators or others wrap up any financial obligations you might leave behind.

But how much life insurance do you actually need? The answer depends on a variety of factors. What type of burial or funeral arrangements do you want? If you have specific preferences, you might want to consider purchasing life insurance that will cover those costs.

Is there a chance you will leave behind minor heirs or dependents? Consider purchasing a life insurance plan with a policy payout that would care for the needs of those you leave behind as long as you think is necessary.

You also should consider your own financial situation, including outstanding debts. Life insurance can be a good way to help your estate settle any debts without infringing upon assets you wish to leave your heirs.

Once you figure out how much life insurance you need, you should consider what type of plan is right for you. Whole life insurance policies come with more expensive premiums but do build some cash value; term life insurance tends to be least expensive for policy holders, but some term life insurance policies have premiums that go up as you age. You might also have options for life insurance through your employer or various associations to which you belong.

By working with an experienced legal professional, you can integrate life insurance plans into overall estate plans. You might even consider combining life insurance with trusts or other legal vehicles to increase the protection you afford beneficiaries and heirs.

Source: Kiplinger, "8 Smart Estate Planning Steps to Die the Right Way," Jane Bennett Clark, Pat Mertz Esswein and Lisa Gerstner, accessed Feb. 19, 2016

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