“Life insurance can serve many different purposes and in our experience is largely misunderstood.”

Life insurance is not only about protecting your survivors in the event of your death… Depending upon the type of policy you purchase, it can also enable you to meet specific life goals: retiring comfortably, paying for your child’s education, accumulating wealth, and paying for estate costs. If you own a business, life insurance can even fund the purchase of your business interest when you die or decide to sell your business. In addition, life insurance can provide you with certain tax benefits.

Life insurance-related strategies may help you to achieve your various investment objectives. Here are some examples:

Term Life

One obvious purpose of life insurance is to provide a death benefit for one’s family if they pass away prematurely. This is typically done via term life insurance (anywhere between 10 and 20 years in length). Term does not build any cash value and eventually expires, but is relatively affordable and helps provide peace of mind.

Whole Life

If someone’s objective is to pass money to their family, tax efficiently, no matter when they pass away, then we would be looking at permanent coverage such as whole life insurance (on one person’s life, or a joint/”second-to-die” policy). As long as premiums are paid on a whole life insurance policy, the policy is guaranteed, whether that’s in 5 or 50 years. This is often the best way to fund a special needs trust for example, or pass money to children in general for wealth transfer planning.

Business Owner Strategies

If you own a business, you can use life insurance to fund a buy-sell agreement, which is a formal agreement that spells out how a business interest will be transferred if an owner dies or decides to sell his or her interest. There also are other business applications for life insurance; some examples include insuring a key employee, providing insurance as an employee benefit, and funding split dollar arrangements or qualified retirement plans.

Tax Strategies

Life insurance can also act as a tax deferred cash value accumulation. The same whole life insurance policies mentioned above builds cash value which can be accessed generally tax-free (via policy loans and surrenders, as loans against your policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest).
Life insurance is not ‘one size fits all’. Each person can benefit from different strategies. We encourage you to reach out and begin the conversation about your personalized strategies.