General Purposes of Life Insurance
Life Insurance is a unique asset which is used to solve some of life's perplexing financial problems due to its potentially high yield and its tax-favored benefits.
It Can be used to:
- Create an Estate. Where time or other circumstances have kept the estate owner from accumulating sufficient assets to care for his or her loved ones, life insurance can create an instant estate.
- Pay Death Taxes and other estate settlement costs. These costs can vary from a low percentage of three to four percent to over 50 percent of the estate. Federal Estate Taxes are due none months after death.
- Fund a Business Transfer. Business owners often agree to buy a deceased owner's share from his or her estate after death. Life insurance provides the ready cash to finance this transaction.
- College Fund for Children or Grandchildren. Cash value increases in a policy on a minor's life (or the parent's life), can be used to accumulate funds for college.
- Pay off the Home Mortgage. Many people would like to pass the family residence to their spouse or children free of any mortgage. Often a decreasing term policy is used, which decreases in face amount as the mortgage balance is paid down.
- Protect A Business from the loss of a key employee. Key employees are difficult to attract and retain. Their untimely death may cause severe financial strain on the business.
- Create a Retirement fund. Current insurance products provide competitive returns and are a prudent way of accumulating necessary funds for retirement years.
- Replace a Charitable Gift. Charitable Remainder Trusts provide tax benefits and life insurance can replace the value of the donated asset. Policies can also be paid directly to a charity.
- Guarantee Loans. Personal or business loand can be paid off with insurance proceeds.
- Equalize Inheritances. When the family business passes to children who are active in it, life insurance can give an equal amount to the other children.