Important things to consider
- How much life insurance?
This depends on the need you have to fulfill. Amounts needed to fund a business transfer or pay death taxes are readily calculated. Use our free interactive life insurance calculator to get a better feel for how much you might need and the factors involved. - Calculating the value of a human life to a family is more difficult.
Consult with us to determine a level of projected total earnings to age 65, based on your current age and assuming a 5 percent annual increase in income, including inflation. (table available for this if needed) - What type of policy should I buy?
A person trained in life insurance can explain the many different policies available, and assist in selecting the one that best fits your needs. Hart Financial has trained personnel to assist you with this evaluation and decision, and you can also find some introductory information about <types of life insurance policies> here. (link to types of life insurance policies) - How should the premium be paid?
Sometimes you can pay the premium from current income, while other times it is advisable to reposition other assets to acquire sufficient insurance coverage. - Who will own the policy?
Life insurance proceeds are included in the estate of the deceased if he or she has any incidents of ownership in the policy. If there is an estate tax problem, ownership by adult children, or an irrevocable life insurance trust, should be considered.
If the insured is a business owner or executive, a corporation may assist in paying premiums. Other times, it may be better to have the corporation own the policy, and use the proceeds to purchase part or all of the owner's interest at death.
Insurance can also be purchased in certain qualified retirement plans.
Ways to Use Life Insurance
Life insurance as an asset offers the potential of high yields, and it offers tax-favored benefits, allowing it to be used to solve some of life's perplexing financial problems.
As a death benefit, life insurance can be used to:
- Create an estate;
- Pay death taxes and other estate settlement costs;
- Fund a business transfer;
- Pay off a home mortgage;
- Protect a business from the loss of a key employee;
- Replace a charitable gift;
- Pay off loans;
- Equalize inheritances when a family business passes to children who are active in it, and an equivalent inheritance needs to be provided to other children; and
- Accelerated death benefits, which can provide payment to a terminally ill or chronically ill policy holder to pay for medical bills and other expenses.
Life insurance can also be used for long-term accumulation goals, including:
- Creating a college fund for children or grandchildren, with a cash value that increases in a policy on a minor's or parent's life;
- Supplemental retirement funds; and
- Serving as an emergency reserve, or a source of loans, since policies often permit borrowing against the cash value of the policy.
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