Life insurance a good way to spend a tax return

May 13, 2011

Tax-return money may be best spent on long-term investments, including life insurance.

Though funds received through federal and state tax returns can pose a major temptation to spend, according to Fox Business, the funds may be better suited as an investment in one's financial security.

Life insurance is one financial investment that the paper suggests spending a tax return on. According to the source, uninsured individuals may benefit in obtaining a policy and underinsured people can also increase their coverage or get an additional term life insurance policy.

"If you own a home or have children, you should have life insurance coverage equal to eight to 10 times your annual income," the source says. "For younger people, term insurance is usually the cheapest, so if you don't have enough protection, start with term first and see if you can get the coverage you need."

Other wise potential ways to spend tax return funds that Fox suggests include paying down debt, creating an emergency fund, saving toward short-term goals or donating to a worthy cause. However, should something unfortunate happen to an individual, death benefits from life insurance can also go toward funding all of the above. 

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