Life insurance not just for the wealthy

Jul 27, 2011

Families can use life insurance to pass wealth down to their children

Though many Americans recognize the value of life insurance as an investment or retirement vehicle for wealthy people, a report says that could be a common misconception.

Investopedia cited a study from The Life and Health Insurance Foundation for Education that showed many Americans were unaware exactly who would benefit the most from life insurance. The study used fictional characters - Batman, Spiderman, Marge Simpson, Harry Potter and Fred Flintstone - to determine consumers' knowledge on life insurance needs.

According to the report, most incorrectly assumed Batman would need life insurance because of his high risk of death. However, with his considerable wealth, the superhero might be able pass down his finances to heirs quite easily, though he does not have any dependents in the first place. The same holds true for Spiderman and Harry Potter, both of whom could pass away with little financial consequence to anyone else. Only Marge Simpson and Fred Flintstone - two people with families - could use a life insurance policy.

Ultimately, experts recommend consumers with dependents purchase a term life insurance policy to cover the financial impact of their death. At the same time, those who lack dependents could use a life insurance policy to pass their money on to a charity, experts say.

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