Why have life insurance?

•It transfers the economic loss of death from an individual to a insurance company by way of a life insurance contract

•It can help us take care of our own and extended families should we die

•Death is not an excuse for disobedience

üOther Benefits: Estate Planning

•Life insurance products can be helpful in making sure there are sufficient funds for estate tax purposes

üAn owner has a business worth $3 million.  When he dies, he wants the business to pass to his son. How can life insurance help?

•The owner puts the business in a trust, with the son as trustee, and buys a $750,000 life insurance policy, with his trust as beneficiary. 

•When he dies, the trust takes the $750,000 policy  and pays the estate taxes.  The son is the beneficiary and now owns the business estate-tax free.

üRetirement Planning

•The cash-value portion of life insurance grows tax-free, after (lots of) fees and expenses

üAn investor wants to save for retirement.  He has already invested the maximum in his 401k, Roth IRA, and other vehicles.  How can life insurance help?

•A cash value product provides both a death benefit and savings component.  The cash value portion grows tax deferred after fees and expenses

•The investor can borrow against the cash value in the insurance contract for a low-cost loan. He will pay a specified interest rate for the loan, and if not paid back, the death benefit is reduced

üForced Savings

•For those without the discipline, life insurance can be an expensive type of forced savings

üThe investor is unable to save for retirement, although he is good at paying his bills.