Why Life Insurance Should Be Part of Your Estate and Financial Strategy

When people first consider purchasing life insurance, the multitude of radio and television commercials come to mind where couples are buying policies to pay for their funerals to avoid burdening their family. This messaging stirs up concerns about our own mortality, which can blind otherwise strategic and long-term thinkers about the logical and necessary role life insurance should play in our own financial plan. 

Life Insurance: More Than Just Funeral Costs

While life insurance can be used to fund funeral costs, it can do so much more and the higher your net-worth the more important it is to use life insurance as an essential element of your estate plan. Life insurance can be used to pay outstanding debts and provide for ongoing living expenses (i.e., education, mortgages, and other everyday costs) after the insured's death. Life insurance can also be used as an alternative asset class that provides tax-free and very competitive returns to cover the cost of corporate or personal taxes on death, provide cost and tax-effective retirement income, and so much more. 

Life Insurance for Business Continuity

From a business perspective, life insurance is a necessary tool in the transition of a successful business to the owners’ business partners or heirs; for example, to fund the purchase of a deceased partner’s shares or cover other business-related expenses.

Common Concerns About Life Insurance

If you find that you, or a loved one, is hesitant to create an estate/financial plan or to include life insurance as an element of your financial portfolio, try to focus on the economic objectives rather than your mortality.

You will want to speak with an expert when considering or purchasing life insurance to fully address and understand the following: 

1. Cost Concerns: Many perceive life insurance as an expense rather than an investment; particularly if cashflow is an issue.  It is important to understand how life insurance can be used as part of an overall investment strategy as well as the different financing options and types of insurance. 
   
   
2. Lack of Understanding: Life insurance is complex; there are different financing methods, different forms/types of insurance, different options/riders, different providers, etc. Life insurance is not one size fits all. You will want to speak with a life insurance expert who has the expertise, knowledge, and modeling capabilities to find the best life insurance product and strategy for your specific circumstances and needs. 
   
   
3. Misconceptions: There are many misconceptions, including there is “no need to purchase life insurance until I am older.” This could not be further from the truth; for example, a properly structured life insurance policy purchased at a young age could be the most cost-effective and powerful means of maximizing retirement income. Who would not want to be financially independent in their mid-to-late 50s?
   
   
4. Prioritizing Financial Goals: There are numerous financial obligations that we face in life such as saving for a home, education, or retirement. A properly designed life insurance policy can be used as part of an overall plan to possibly achieve these objectives faster and at a lower cost.

We hope this article has provided some insight into the benefits and need for life insurance to be a component of your financial planning. We look forward to assisting you on this journey.