TOP TEN REASONS TO BUY LIFE INSURANCE

 

Why buy life insurance?


 CAPITAL NEEDS (Cash): You can protect your family from the disastrous effects of a breadwinners untimely death. Noteworthy is, this income tax free cash can be used to pay off or pay down the mortgage. You can also use life insurance to replace income lost, and create a college fund for the survivors. For the sandwich generation, (those caring for their children and their parents), life insurance proceeds can provide for cash to help take care of the children and grandparents. Finally, your final expenses may be paid with income tax free proceeds.

 WEALTH REPLACEMENT: Your life insurance can be used to replace money being used for some other worthwhile purpose such as charitable or an income annuity. As a result, you may wish to use current principal for other goals, but utilize some of your funds to purchase life insurance to replace the principal.

 ESTATE EQUALIZATION: You can equalize your estate or beneficiary leave behind goals with life insurance. For some, the goal is to try to balance assets or property passed to beneficiaries. However, some estates are very hard to divide. Your division of a farm or business may not be a good idea. You can purchase life insurance on your life naming beneficiaries as needed to achieve your estate or final wishes for as near an equal inheritance as possible.

 CREDITOR PROTECTION: Your cash value build up in a whole life or permanent life plan are generally protected from creditors. This can be especially important for business owners who may have the bulk of their assets tied up in their business and subject to risk. Check with your state laws, legal counsel, as well as a knowledgeable agent for the ownership structure of the policy.

Family Structures Have Changed and Are Likely to Continue

 SECOND MARRIAGES: Your blended family with children from a prior and current marriage are often more difficult to plan for in an estate plan. Your life insurance can create the cash needed to provide for equitable treatment of the beneficiaries and the surviving spouse.

 SPECIAL NEEDS CHILDREN:   Your special needs child can be protected with a special needs trust. Your trust can be funded with life insurance to provide funds for a disabled or special needs child. The trust may provide financial assistance beyond what federal and state assistance may provide without risking the loss of those benefits. See your legal adviser for more details on this type planning.

How To Transfer UN-Needed Money to Next Generation

 ANNUITY RESCUE / ARBITRAGE: You may not want to risk your life’s savings in the stock market or direct market risk investments. For many, seeking alternative ways to produce the income that they need in retirement, a combination or split annuity may be a way to provide the income you need while protecting your principal.

Spending principal is a cause for concern for most. Bank CD rates produce little income. By purchasing a single premium immediate annuity (SPIA), you can provide for the guaranteed income needed now. You can use a portion of the annuity income to purchase life insurance to replace the principal.  Keep in mind that your gain in annuities and IRA’s are income taxable to the owners and beneficiaries. A nice result for you from a successful arbitrage or rescue plan is that you convert a income taxable asset to an income tax free asset for your beneficiaries.

 BUSINESS PLANNING: You or your key employee in the business (often the business owner) may produce the majority of the business sales and income. What happens to the business in the case of an untimely death or disability?

Especially relevant, your life and disability insurance can provide the cash needed to keep the business going until a replacement or new owner can be found. In addition, most professionals in estate planning will tell you that a business is one of the most difficult assets to manage in estate administration. Without needed cash, you may experience a significant depreciation in the value and viability of the business. Loss of value can occur quickly with out proper cash planning.

 RISK OF CHRONIC OR CRITICAL ILLNESS: Many of today’s quality life insurance plans provide for Accelerated Benefits (taken from the death benefit) in the event of certain chronic or critical illnesses. For many, the lack of cash and resources is often a point of significant stress in these situations. Finally, you can have a high qualify life insurance plan that provides for these tax favored options in case they are needed? The industry calls these benefits, Accelerated Benefit Riders.

Protect Your Ability to Purchase Insurance for Life Planning

 ABILITY TO BUY INSURANCE: You have to be healthy enough to purchase life insurance. Put simply, the best time to purchase a policy is when you are younger, healthier, and can get the best rates.  

By purchasing at least a quality Term Life policy at an earlier age, you stand a better chance of locking in a good rate class for your entire life. It is advisable to select a company that offers opportunities to convert your Term Policy to a permanent life policy with no health questions at that time. If you have a current Term Life policy that does not offer this option, you should consider whether this is sufficient for your future plans?

 

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