Life insurance can help solve several problems.
You have heard life insurance is important.
You do not understand why.
What is the point of money being paid out from an insurance policy when you die?
According to a recent Successful Farming article titled “Using Life Insurance in Estate Planning,” life insurance is not to help you but to help those you leave behind.
The article points out the value of life insurance, specifically to farming families.
The money used can help transition the family farm from one generation to the next.
It can provide funds exempt from the estate tax and can be used by some siblings to purchase part of the farm estate from siblings who want to get out of the family business.
What if you are not a farmer?
Are there other purposes to life insurance?
Life insurance can help pay estate taxes.
Life insurance can help pay off your creditors.
Life insurance can fund your funeral.
Life insurance can provide an inheritance to heirs.
Remember, there are two basic types of life insurance.
What are they?
The first is term life insurance.
This covers the risk of death.
As a result, the amount paid in premiums will increase as the covered individual ages.
The second is whole or universal life insurance.
This includes a savings component.
What does this mean?
The policy can accumulate tax-advantaged cash value over time.
In turn, this cash value can be borrowed against to pay for nursing home or retirement costs.
If you borrow against the policy, the proceeds available to your heirs will be reduced.
Life insurance can be a wonderful estate planning tool if properly in aligned with your goals.
Work with an experienced insurance professional to create an life insurance plan to meet your needs.
Reference: Successful Farming (October 5, 2018) “Using Life Insurance in Estate Planning”