Life insurance is a crucial step in planning for your business and family’s future. When death occurs, it’s comforting to know you have the proper financial protection. Life insurance will fulfill promises and obligations when you are no longer living. Life insurance can take many forms to accomplish your goals; there also are benefits to certain types of life insurance policies during your lifetime. Listed below are just a few items of interest:
- If properly written and paid for, the death benefit is income tax-free and can be used to cover any expenses your survivors may incur.
- Life insurance may also be used to help ensure a family business will pass to the intended survivor by helping with estate taxes that exist under the current tax laws.
- The cash-value growth of a permanent policy is tax deferred. You don’t pay taxes on the cash value increases while inside the policy.
- The cash value earned and borrowed from a permanent life insurance policy can be used to help with emergency expenses, college costs, or retirement income.
Your need for life insurance is dependent on your business, personal, and financial needs. As your business and personal life change, your life insurance coverage may need to be updated to adapt to your new needs. Make sure you’re working with a knowledgeable insurance professional. Below is a list and definition of some of the forms of life insurance that may be of interest to your needs:
- Term life insurance provides protection for a specified period of time. Initially, the cost is low for this type of coverage. Depending on your age and health, you can guarantee your rates for periods of time up to 30 years. Another nice feature is these policies may be easily convertible to permanent coverage and cancelled at any time without a penalty.
- Permanent life insurance consists of a variety of coverages from fully guaranteed premiums, values, and death benefits to complete flexibility of premiums, interest rates, and death benefits option. Some of the names you may be familiar with are whole life, variable life, and universal life.
- Last survivor life insurance is a type of policy used in estate planning cases to help with estate tax issues. This policy is written on a married couple and can be useful if you have one spouse that may have medical issues making insurability more difficult.
- Buy-sell life insurance is used by many businesses to insure the successful transition of shares of stock of a corporation when an owner dies. Along with a document drafted by your attorney, the life insurance can fund the purchase of the corporation from the deceased estate.
- Key person insurance allows an employer to purchase a policy on an employee crucial to the success of the company. If a company would be financially impacted by the death of the employee, with the employee’s consent, the company can purchase a life insurance policy to offset the financial loss if they should pass away. Remember that life insurance insurability is very different than property and casualty. When it comes to life insurance, a person must show they have a financial interest in another person’s life at the time the policy is originally purchased—not at the time of claim. This is the exact opposite of the property and casualty business, where a person must show a financial interest at the time of claim.
Life insurance is a very valuable product that can be extremely complicated. The claims process will only happen one time, so you expect the policy to be written correctly. Make sure you spend time with your insurance professional to periodically review your life insurance needs. Times change, exposures change, and that means your life insurance needs to change. IBI