Uses of Life Insurance
Life Insurance has many uses for both individuals and businesses. Some common uses include:
Individual Uses at a glance
Most “individuals” need affordable life insurance. It’s that simple. No matter your age, marital status, or whether you have dependent children or not, life insurance is an important safeguard to consider for you and your family’s financial future.
- Burial Expenses – Life insurance proceeds an ensure that there is enough money for proper funeral and burial expenses
- Debt – Personal bills, credit card debt, student loans, and personal notes can be covered by life insurance in the event of an individual’s death.
- Mortgage Protection – The proceeds of a life insurance policy can pay off the balance of a mortgage or provide a stream of income to pay monthly mortgage or rent payments.
- Income Replacement- In the event of an individual’s death, life insurance proceeds can provide a supplemental income stream to ensure that the surviving family members are able to maintain the same standard of living.
- Education- Life insurance proceeds can ensure that the education costs of the insured’s children are covered.
- Taxes – Federal estate and state inheritance taxes can be pre-funded using life insurance to preserve the value of an estate.
- Philanthropic Planning – An individual can use a life insurance policy to fund a donation to a charity or leave a gift to a family member. (Also known as Charitable Giving)
Business Uses at a Glance
“Business Insurance” is the term used in the insurance industry to describe the uses of life insurance and disability income to solve certain financial needs of business and business owners
- Key-Person - Coverage financially protects the company from adverse financial impact if a key employee suddenly dies. The policy would provide funds to find, recruit and train a replacement, help replace any lost profits, and strengthen the balance sheet to assure creditors that the business will continue.
- Buy-sell Agreements - Ensures that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. The owners assume the business interests/shares and the family gets the financial proceeds from the buy-out.
- Business Loan Coverage – Life Insurance can be used to pay off a bank loan or other business debts in the evens of a key employee or business owner’s death.