The most basic purpose of Life Insurance is to replace the income of a loved one who has died. In my industry, we call this ‘mom & pop’ insurance. This is what couples buy after they acquire their first mortgage or have their first baby, for example. Let’s say you are a married woman. Your husband makes $50,000 per year, and you make $50,000 per year. How much is life Insurance enough to replace his income or your income? Could you live on one person’s income; does it really make sense to spend money on the insurance? Those are the questions we discuss.
Term life (no cash value) or whole life (cash value). Which is right? That’s another topic for discussion. We’re here to guide you.
More advanced purposes for Life Insurance include scenarios such as:
- Buying the stock shares of your deceased business partner from their estate, so that their spouse or children do not become your new partner!
- Paying estate taxes so that your full estate can pass intact to your family.
- Bequeathing a sum to family or charity, even if they were never dependent upon you for income.
- Establishing a trust fund to care for a disabled child (particularly an adult) in the event of your death.
- ‘First to die’ or ‘second to die’ policies, where more than one person are insured on a single policy.
- Hybrid Life Insurance is used to leverage your money to pay for Long Term Care.
The list goes on. Whether there is a need for Life Insurance can be asked this way: ‘If a person dies, will that trigger any sort of financial need for another person or business entity?’
Please contact our office if you’d like to talk about Life Insurance. We won’t be posting frequent blog entries in this area in the future, but I’ll post another about special needs planning pretty soon, so that you can see how Life Insurance is helpful during times of crisis & change.