Life insurance has many uses personally and for business.   Personally it can be used as protection against premature death, for tax-free accumulation for retirement, for loans for buying items such as cars, charitable giving to your favorite charity, and many others.   From a business standpoint, life insurance is used to secure loans, set up buy-sell arrangements, key-man protection, deferred compensation, and loan money to the business for expansion, etc.

It is important to understand how to use life insurance, so you can maximimize the value to you, your family and your business.   The most common use is to buy a term policy that will cover you in the event of your untimely death.   This policy can be used to provide income replacement to your family or buy your partner out in a buy-sell arrangement.   Term is often used for court ordered life insurance decrees, key-man insurance and to function as a loan guarantee.   When you start using cash-value products like whole life and universal life, there are even more creative uses.   The internal build up inside of the policy can be used as an incredible supplemental piece to your retirement.   The money grows on a tax deferred basis, and can be accessed on a tax-free basis if done correctly.   The internal buildup is also a great fund to draw upon as you go to borrow against to buy new cars, invest elsewhere, etc.   Cash value life insurance is also commonly used as the mechanism for deferred compensation for companies with its leverage and tax-advantage.   There are many other uses that I am not mentioning, but this shows the tremendous flexibility of these products.

A lot of our clients will by life insurance based upon a single need.  For example, they might want it to serve as mortgage protection for their primary mortgage.  We worked with a client the other day who had a mortgage for 275,000 and wanted to have that paid off so her family would have the house free and clear with no payment.

Other single needs that we see clients by life insurance for:

Income replacement- replacing all or part of their income for their family.

Final expenses- To cover all of the immediate needs of the burial.

College education- Insurance to pay for the childrens education

Mortgage protection- To pay off the existing mortgage (s) so the family is not buried in debt

Tax Favorable Accumulation- The use of the cash value for tax favorable accumulation

Business loan- When a client is applying for a business loan and the bank requires life insurance in the amount of the loan

Buy-Sell- Life insurance on partners in a business that will buy out a partner due to their untimely death

Key Man life insurance- Taking out a life insurance policy on a key person in the business to help replace the value of  that person to the business.

There are other single needs that people will buy insurance for.  We try to have our clients avoid focusing on a single need and look at their overall picture and needs.  With that being said, life insurance is a very effective way to cover a single need and create leverage.