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.
Most CFP’s, (Certified Financial Planners) believe that life insurance should be the first item on your agenda when packaging together a sound financial plan. Life Insurance should be considered to help with the following list of critical issues. Have you reviewed your life insurance policy? Are your beneficiaries set up correctly? Do you have enough insurance for your family? What are the tax implications with your life insurance plan?
1. Income replacement for your family
Does your family depend on your income? If so, life insurance can replace that income for them when you have a life event. Do you have young children? What would happen if they didn’t have your income anymore? There are many ways to look at one situation. Whether you are looking for protection for your family, spouse, or children, be sure to secure enough life insurance for their future needs.
2. Final expenses
In some instances Life insurance can pay your funeral and burial costs. (FINAL EXPENSES) If you are not planning for your family regarding income replacement, then you might want to just get a basic policy that will help with basic life burial costs, or other costs that your health insurance do not cover. You can most likely buy a small policy with $10,000 – $20,000 of coverage for a nominal premium. You then will not place the burden on your family for these costs.
3. Create a LEGACY for your heirs
Some families retain wealth over decades because they know what the value in wealth transfer. With the tax advantages life insurance offers, it is silly not to use it. Do you have other assets to pass to your heirs? That is great if you do… Make sure your assets aren’t to big or you will most likely need to buy life insurane to make up for your estate taxes. You can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
Here are ust a few reasons why you should buy life insurance. No matter what your current financial situation is. Be sure to consult your life insurance planner to get set up with the life plan that makes sense for your situation.
