A Lesson In Life
by David F. Woods, CLU, ChFC
Most of the time, you're so busy living, you probably don't even think of what it would be like if you weren't. Will your spouse be financially secure? Will there be enough money to pay the mortgage or send the kids to college? Life insurance helps meet these basic protection needs, but it can also be used in some ways you may not have thought about. Consider these other uses of life insurance.
What comes to mind when you think about your retirement plan? Your 401(k), IRA or maybe your mutual fund or stock holdings. But did you ever stop to think about how life insurance might fit into the picture? A permanent life insurance policy allows you to build tax-deferred cash values that can be accessed through loans or withdrawals to supplement your retirement income. And, if your spouse has to face the retirement years without you, the proceeds from your life insurance policy will help ensure a comfortable lifestyle. Your spouse can even structure the proceeds into monthly payments guaranteed to last the rest of his or her life.
Did you know that depending on the size of your estate, your heirs could be hit with a large death tax payment after you die - up to 55% of your estate. Through life insurance, you can ensure that the bulk of your estate passes to your heirs, not the tax collectors. Here's how life insurance can help. The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their value. The proceeds are also not subject to income tax and can go directly to your beneficiaries without going through the probate process. If properly structured, your heirs also avoid paying estate taxes on this money.
Besides taking care of family business - life insurance helps grow and protect another kind of business. The one you own that provides your livelihood. What would become of your business if you, one of your fellow owners, or perhaps a key employee were suddenly out of the picture? Life insurance can help in a number of ways. For instance, a life insurance policy can be structured to fund a "buy-sell" agreement. This would ensure that the remaining owners in a business have the funds to buy the business interests of a deceased owner at a previously agreed upon price. In short, the owners get the business, the family gets the money. To protect a business in case of the death of someone who plays a key role in the business, "key person insurance," payable to the business, provides the owners with the financial flexibility needed either to hire a replacement or work out an alternative arrangement.
To learn more about the many uses of life insurance and the important role insurance plays as part of your overall financial plan, meet with your insurance agent or other financial advisor.
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- Choosing beneficiaries for your retirement plans