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.
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.
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.
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:
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.