Viewing Life Insurance As A Tool

For many individuals, life insurance is viewed as a bill, rather than a tool. Don’t have enough savings in the bank? Life Insurance. Family doesn’t have 10 years worth of income to replace the bread winner if they were to suddenly pass away? Life Insurance. Have 20 million dollars in the bank and want to preserve your family’s wealth? Life Insurance.

A part of any healthy financial plan, life insurance needs to be utilized to hedge against the most unplanned risk- your death. “I don’t need life insurance.” is one of the stupidest phrases one can tell an agent. Countless times has an agent heard that rebuttal to then also receive a phone call from the (what would be) beneficiaries hoping to hear that they signed the papers. Not only have they lost their loved one, they also lost the income attached to the love one. Though income isn’t the only reason for life insurance.

Though Income Preservation is one of the more popular reasons why people get life insurance, it isn’t the sole reason, let’s look at another side; key person. Own a business, have investors, or another partner who can’t do what you do for the business? What happens if you or your partner were to suddenly pass away? Could you take on the extra work, would investors be able to make their own money back? How would your family be affected? Key Person May be the answer. Protecting you and your partners from sudden loss to allow 1. your business to have temporary funds as a means to function while you search for a new partner, 2. if not, allows the company to buy out your family so they don’t have to worry about the lost income/equity due to your passing, or 3. Buying out the investors so no one is financially screwed from your passing. It may even be a business expense (please consult your CPA or tax professional first).

Income Preservation, Key-Person, what about Retirement? Again, life insurance is to be viewed as a tool! With the new plans coming out everyday you can utilize return of premium terms (term policies that pay you back every last penny in your account), Index Universal Life Plans (IULs have their cash value grow based on an index mirror a market such as the S and P 500), or Whole Life insurance aimed at preserving wealth or having your family pay the death tax associated with larger estates (over 5.4 million or more). Putting yourself in a position to save while growing funds in a tax advantage account to help you balance your tax portfolio.

There’s a million different reasons why life insurance is an important tool to use in your portfolio. Talk to an agent about which avenue is best for you and your families/business’ situation.

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