5 times you won’t need a life insurance

Question: I will go straight to the point. Why do I need to buy life insurance? I do not see the val-
ue in it. –via “Ask a friend, ask Efren,” a free service available at www.personalfinance.ph and Facebook.

Answer: Actually, there are five times you will not need life insurance. They are as follows:

1. If you are immortal. One of the benefits of life insurance is that it covers the financial loss of your heirs created by your untimely demise. Immortals do not face any risk of demise, untimely or not. Therefore, there will not be any potential financial loss for your family.

2. If you already have enormous earning assets. Even if you are mortal, your family will not suffer from any financial loss because they will already have a huge pile of cash and earning assets on which to subsist for the rest of their lives.

3. If you do not have the money to pay for life insurance premiums. Life insurance does not come for free and premiums can be prohibitive depending on the size of life insurance proceeds you want to leave behind.

4. You will leave behind a net estate exempt from estate tax. Life insurance can be bought so that your heirs will receive tax-free inheritance from you, which they can use to pay for estate taxes. If what you will leave behind in terms of net taxable estate is P200,000 or less, then your estate will be exempt from estate taxes.

5. You do not have heirs. If you do not have heirs and you just want to give back whatever is left of your estate to the government at the time of your death, then you really would not need to get life insurance.

But let us get real. You are by no means immortal. Much more, you do not know when you will be called from this life.

The majority of people, perhaps including you, still have to build up their wealth and throughout their lifetime at that. But this does not mean that you cannot leave financial assets behind or that you cannot spare cash for life insurance, particularly when life insurance companies have come up with ingenious ways of making premium payments cash flow affordable.

You just need to plan your life insurance well. Life insurance will be great in providing for the cash to pay estate taxes especially when the net estate to be left behind is in the form of illiquid assets like property.

People do not realize it but they are multimillionaires because of the enormous potential of converting their human capital to financial capital. This potential will make their net taxable estate exceed the P200,000 exempt limit.

Wealth is personal and people tend to want to control its distribution even at the point of death.

Again, life insurance is there not only to cover the tax on the right to transfer property but also to help create wealth that can be passed on to the next generations. And this wealth can be used to create more wondrous things for the betterment of life.

Life insurance is practical. You will always find a use for it.