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Additional Life Insurance Uses

10 LIFE INSURANCE USES

Life insurance is unique. It can create an estate with premiums low in comparison to the total death benefit, and it also enjoys many tax advantages. Usages include:

1. Provide liquidity to pay death taxes and estate costs, thus avoiding necessity of liquidating valuable assets to pay these expenses. Note that Federal Estate Taxes are due only 9 months after death.

2. Provide funds to pay off a mortgage at death.

3. Spouse Insurance. Often we forget or underestimate the dollar value of work done in the home by both husband and wife in making an analysis if insurance needs.

4. Provide funds for college education. Either at death, or, during life, the policy cash values can be withdrawn or borrowed against to pay college costs. Loans or withdrawals will reduce future death benefits.

5. Guarantee funds to repay loans or other debts owed by the decedent. Life insurance proceeds provide cash to pay estate obligations and help provide the survivors with a debt free start.

6. Help meet retirement income needs. The policy cash values can be accessed to provide funds to supplement pensions, Social Security and other retirement income.

7. Provide funds for an orderly transfer of a business interest at death. Business owners may have an agreement to buy the interest owned by a decedent, but lack the cash to pay for the decedent's share of the business.

8. Provide funds for a business at the death of a key employee. These funds from insurance on the life of the employee can be used to recruit, hire and train a replacement, and to provide working capital to help offset financial losses due to the loss of the key person's services.

9. Charitable Giving Life insurance death benefits payable to an organized charity can help provide funds for the charity's work, and may provide tax benefits as well.

10. Help equalize inheritances. An example would be where the decedent leaves a business interest or farm to the children who are active in the business, and provides equal value benefits to other children through insurance proceeds.