Many financial experts consider life insurance to be the cornerstone of sound financial planning. It is generally a cost-effective way to provide for your loved ones after you are gone. 

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It can be an important tool in the following ways: 

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Income replacement - For most people, their key economic asset is their ability to earn a living. If you have dependents, then you need to consider what would happen to them if they no longer have your income to rely on. Proceeds from a life insurance policy can help supplement retirement income. This can be especially useful if the benefits of your surviving spouse or domestic partner will be reduced after your death. 

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Pay outstanding debts and long-term obligations - Consider life insurance so that your loved ones have the money to offset burial costs, credit card debts and medical expenses not covered by health insurance. In addition, life insurance can be used to pay off the mortgage, supplement retirement savings and help pay college tuition. 

Estate planning - The proceeds of a life insurance policy can be structured to pay estate taxes so that your heirs will not have to liquidate other assets.

 
Charitable contributions - If you have a favorite charity, you can designate some of the proceeds from your life insurance to go to this organization. 

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NOTE: Portions of the above information have been graciously provided by The Insurance Information Institute at www.iii.org/individuals