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No Savings? Consider Life Insurance

By Tom Koziol on May 23rd, 2010

According to a recent survey by the Employee Benefit Research Institute (EBRI), approximately 54 percent of people have savings of less than $25,000, and a staggering 27 percent have less than $1,000 in assets.

If you are a member of the "little or no savings" club, there is a solution to provide for your family in the event of a financial catastrophe--life insurance. Think of your savings as the bank paying what you have saved, while the life insurance company pays what you intended to save. In other words, life insurance bridges the gap between the financial needs of your dependents and the amount available from your assets.

In many households, the spouse and children depend on the money the breadwinning member of the family earns. For the main wage-earner, it is important to establish financial security and life insurance may be a way to prevent financial catastrophe for families. Life insurance can help families avoid crisis at a most inopportune time. Without life insurance or substantial savings, your dependents may suffer financial hardships if you pass away.

On the other hand, life insurance has the ability to function as an emergency fund during your lifetime. For example, permanent life insurance does this through a feature called cash value, which lets you borrow against the investment portion of your life insurance policy. However, keep in mind that any unpaid loans are deducted from the insurance benefit. Life insurance also offers flexibility. It can be a major part of a person's estate plan, as well as a cash accumulation vehicle.

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