While there are many different types of life insurance products, they all serve a similar purpose: financial protection for your family.\u00a0\u00a0 There are products available that simply pay a death benefit for bill and expenses.\u00a0\u00a0 Others provide funds for retirement, college education and other needs for your family if you die.\u00a0\u00a0 Still other products simplify the process of providing a bequest, buying or selling a business or protecting assets.\u00a0\u00a0 Identifying individual needs begins with a basic knowledge of the many uses of life insurance.<\/p>\n
FINAL EXPENSES<\/strong><\/span><\/p>\n The primary purpose of life insurance is to provide funding for the person’s final expenses.\u00a0\u00a0 Such expenses may include medical bills arising from terminal illness; funeral and burial costs; payment of debts; payment of estate and final income taxes; and the creation of an emergency fund to cover immediate necessities incurred while survivors readjust to life without the deceased.<\/p>\n ESTATE TAXES<\/strong><\/span><\/p>\n Any estate taxes owed to the government following a person’s death must be paid in a timely fashion, and in cash.\u00a0\u00a0 Often estates, particularly if largely composed of assets such as land or investments, lack the necessary amounts of cash.\u00a0\u00a0 As a result, an estate facing looming tax deadlines may have little choice but to sell property or liquidate investments at significantly reduced “forced-sale” values.\u00a0\u00a0 Life insurance, in sufficient quantity, can provide the necessary cash when needed most.<\/p>\n INCOME NEEDS OF FAMILY<\/strong><\/span><\/p>\n Life insurance can provide sufficient income so family members can continue their lives with as little financial disruption as possible – such as child continuing his or her current college eduction.\u00a0\u00a0 The amount of insurance should allow adequate family income to continue until the youngest child is self-supporting.\u00a0\u00a0 If desired, an amount can be established to provide income to a surviving spouse or other dependent relatives (such as aged parents) after the children are grown.<\/p>\n MORTGAGE CANCELLATION<\/strong><\/span><\/p>\n This type of policy will pay off the mortgage on a house, relieving the surviving dependents from the burden of making monthly payments which may increase if the mortgage is subject to interest and\/or payment adjustments over time.<\/p>\n EDUCATION INSURANCE<\/strong><\/span><\/p>\n A life insurance policy on a parent’s life may also be used to pay for a child or children’s college expenses if the parent dies.\u00a0 If the policy is one with cash value (e.g., Whole, Universal or Variable Life) and the parent lives, he or she can finance college expenses from current income or savings, using the loan or cash value available form the life insurance policy to help.<\/p>\n FINANCIAL EMERGENCIES<\/strong><\/span><\/p>\n If purchasing life insurance with cash value, a person can realize significant financial benefits from the policy while alive.\u00a0\u00a0 For example, if the policyholder encounters a financial emergency, the loan provision can be used.\u00a0\u00a0 Or, if necessary, the policy can be turned in for its cash-surrender value.<\/p>\n LIFE INSURANCE TO PROVIDE A BEQUEST<\/strong><\/span><\/p>\n A person may have a desire to leave a sum of money to an individual or institution but may not have the funds or property for that purpose.\u00a0\u00a0 One option is to purchase a life insurance policy for the desired amount, naming the individual or institution as beneficiary.\u00a0\u00a0 In the case of the individual, the policy can also be arranged so that the proceeds will be paid as regular income rather than a lump-sum death benefit.<\/p>\n RETIREMENT INCOME PLANS<\/strong><\/span><\/p>\n There are many types of life insurance policies designed to create retirement income.\u00a0\u00a0 When coordinated with Social Security retirement benefits, these policies can provide a substantial retirement income at a very reasonable cost.<\/p>\n TO PROTECT CREDITORS<\/strong><\/span><\/p>\n Life insurance is used extensively as collateral for business loans.\u00a0\u00a0 A policy on the borrower’s life can be assigned to the creditor, who is then protected against the possibility that the borrower might die before paying the debt in full.<\/p>\n BUSINESS INSURANCE – PROPRIETORSHIP<\/span><\/strong><\/p>\n Due to the death of the proprietor, the company’s assets may, to a large extent, be lost through the forced sale of the business.\u00a0 To prevent this, a Sale and Purchase Agreement, financed by life insurance, may be used.\u00a0 The Sale and Purchase Agreement is a written contract between the owner and the purchaser (a valued employee or other person) for the firm’s transfer in the event the owner dies.\u00a0 It stipulate the price to be paid or a formula for arriving at a fair value.\u00a0\u00a0 To guarantee that the purchaser has sufficient funds to complete the agreement or at least make a reasonable down payment, he or she can purchase life insurance on the life of the owner.\u00a0 The proceeds of the life insurance are paid to the purchaser and, as per the agreement, this money is paid to the executor of the estate in return for the business.<\/p>\n BUSINESS INSURANCE – PARTNERSHIP<\/span><\/strong><\/p>\n If a partner dies, the surviving partner often is unable to purchase the deceased partner’s equity.\u00a0\u00a0 As a result, the business must be sold or the partner must continue in business with teh deceased partner’s spouse as a partner.\u00a0\u00a0 Even if the spouse has no interest in being active in the business, the financial need to keep the business income flowing may offer no other option.\u00a0 To avoid this situation or at least preserve all the business-continuation options available, the firm or the partners buy life insurance on the lives of the individual partners.\u00a0\u00a0 The proceeds are paid either to the surviving partner or to the partnership and are used to purchase the interest of the deceased partner according to the agreement.\u00a0 With this arrangement, the business can continue, the surviving partner obtains additional equity in the firm, and the deceased partners’ heirs receive their rightful compensation.<\/p>\n BUSINESS INSURANCE – SMALL CORPORATION<\/span><\/strong><\/p>\n Each stockholder of a corporation carries sufficient life insurance on the other stockholders to provide cash to purchase the stock of the deceased business associate.\u00a0\u00a0 Again, this plan provides for a guaranteed market, a fair price for the deceased’s heirs, full ownership for the survivors, as well as the money to execute the plan.<\/p>\n BUSINESS INSURANCE – KEY MAN<\/span><\/strong><\/p>\n Many times, life insurance is carried by businesses on the lives of important executives or others, naming the business as beneficiary.\u00a0 Money obtained upon the death or disability of the insured is used to help the business through an adjustment period until a suitable replacement can be found.<\/p>\n In addition to providing cash to help the company over an unsettled period, a cash-value policy may provide funds for an emergency reserve, strengthen credit and provide collateral for loans.\u00a0\u00a0 These proceeds also can be used, if not otherwise needed, to provide or supplement a retirement program for the employee, redeem the deceased’s corporate stock or continue the salary to the deceased’s spouse.<\/p>\n PRACTICAL SUGGESTIONS FOR LIFE INSURANCE POLICYHOLDERS<\/span><\/strong><\/p>\n Keep your policies in a safe place.\u00a0\u00a0 Generally, this does not mean a safe deposit box, because should you die, the box can only be opened by a court order.\u00a0\u00a0 It is better to find a safe place at home.\u00a0 Let the person who will settle your affairs know where your policies are and who your insurance agent is.\u00a0\u00a0 Should you lose your policies, or if they are destroyed by fire or other property loss, ask your life insurance company to issue duplicates.\u00a0\u00a0 It is easier to do this if you keep a separate record of the policy numbers.<\/p>\n Discuss your life insurance program with your family and other dependents.\u00a0 You are buying life insurance for their protection; it’s important that they know how your program is planned.\u00a0\u00a0 Better still, have them share in your planning from the beginning and in each addition or change to the program.<\/p>\n Because your individual situation often changes, sit down with your agent to review your life insurance program at least every two years.\u00a0 Are the right beneficiaries named?\u00a0 Are new children taken care of?\u00a0 Is the selected income arrangement still the best choice?\u00a0 This review is a service your insurance agent should render without charge or obligation.\u00a0\u00a0 Don’t hesitate to ask for help.<\/p>\n","protected":false},"excerpt":{"rendered":" While there are many different types of life insurance products, they all serve a similar purpose: financial protection for your family.\u00a0\u00a0 There are products available that simply pay a death benefit for bill and expenses.\u00a0\u00a0 Others provide funds for retirement, college education and other needs for your family if you die.\u00a0\u00a0 Still other products simplify […]<\/p>\n","protected":false},"author":2,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"open","template":"","meta":[],"_links":{"self":[{"href":"https:\/\/sumnar.com\/index.php?rest_route=\/wp\/v2\/pages\/183"}],"collection":[{"href":"https:\/\/sumnar.com\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/sumnar.com\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/sumnar.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/sumnar.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=183"}],"version-history":[{"count":6,"href":"https:\/\/sumnar.com\/index.php?rest_route=\/wp\/v2\/pages\/183\/revisions"}],"predecessor-version":[{"id":196,"href":"https:\/\/sumnar.com\/index.php?rest_route=\/wp\/v2\/pages\/183\/revisions\/196"}],"wp:attachment":[{"href":"https:\/\/sumnar.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=183"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}