Life Insurance: Who Needs It?

Who really needs life insurance anyway?

That's a great question.

Many people are "sold" life insurance every year. Some need it, some don't.

More often than not, it's probably the wrong amount. My suggestion is to do some financial planning first to determine your need.

If you are the only breadwinner in the family, you probably need life insurance. My wife doesn't work outside the home so if anything ever happened to me (I mean croak), she would need these funds to pay off any debt, go back to school as well as support herself from income from the death benefit. If you work, and your spouse doesn't, start looking for a good policy. More than likely, it will be a good size death benefit so you may want to consider cheaper term insurance.

If you partner in a business you definitely need some life insurance. As a financial adviser, it amazes me how many business partners don't have a bu y-sell agreement. A buy-sell agreement will allow you to buy out your partner(s) in the case of death of one or more partners. Each partner simply buys a policy on each of the other partners. In the event a partner dies, the other partners have the money to purchase that portion of the business and pay the deceased family or beneficiaries.

You probably need life insurance if you're a parent with school age children. If both parents work, like many do, how will you replace the lost income of your spouse? It's especially important if your expenses require two salaries. Young parents are still building wealth, so life insurance will create an estate where one does not exist. The proceeds can be used to pay down debt, support for the remaining spouse or pay for college.

If you are wealthy, life insurance may help you out. How? Well, each person in 2014 has an estate tax exclusion of $5.34 million, and $10.68 million for couples. Here's how y ou fix Uncle Sam. Buy a life insurance policy, make sure you are not the owner. You could use a trust as an option. The policy pays to your beneficiaries to replace the money lost to estate taxes. Since another entity owns the policy, you pay no estate taxes on the death benefit. Remember, it's easy to get over those exclusion numbers. I see people with rental property and life insurance in the millions that will help hike your estate value.

There are many different scenarios where a person may need life insurance. These are the ones that really stick out. Hire a good financial adviser to develop a plan and determine the correct amount that you need. Why guess?

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• During a hurricane, there are often separate deductibles for high force winds. The deductibles are often expensive and can be up to 5 percent of the home's insured value, according to HLN.

• Most policies cover damage caused by wind and will cover flooding caused by a tree crashing into the roof, according to USA Today.

• Most home insurance policies do not cover flooding. Flood insurance usually has to be purchased separately, according to Farmers.com.

• Mortgage lenders usually force homeowners living near shorelines to have federal flood insurance, according to Reuters. So you're likely covered if you don't own your home outright and you live near a shoreline.

• Even when a federal disaster area is declared, assistance comes in the form of loans that often have to be repaid, according to the Washington Post.

• Many insurance policies do not cover damage caused my multiple sources, like wind and flooding, according to Reuters.

• Generally, damage to cars caused by falling trees and flooding is only covered by comprehensive insurance, not by liability insurance, according to Fox Business.

• Renters often have to pay separately for flood insurance, according to Smart Money.

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