The Principal Uses of Personal and Business Life Insurance

Broadly stated, life insurance is indicated only when there is a NEED. 

The following is a checklist of common estate building and estate conservation needs that life insurance can satisfy: 

  • Provide for income needs of surviving dependent family members 
  • Pay federal and state death taxes and other estate settlement costs 
  • Pay debts 
  • Provide for children’s education 
  • Shift wealth from one generation to another in the most cost-effective manner possible 
  • Meet “special” financial demands of physically or mentally handicapped or learning-disabled children or parents or other dependents with physical or mental limitations 
  • Benefit a charity 
  • Relieve survivors of financial management burdens by providing an inexhaustible lifetime annuity 
  • Create an “instant estate” 

The following is a checklist of business insurance needs that life insurance can satisfy: 

  • Fund a buy-sell agreement 
  • Finance nonqualified deferred compensation arrangements 
  • Finance Death Benefit Only (DBO) plans 
  • Provide a basic level of financial security for families of all employees 
  • Recruit, retain, retire, and reward key employees 

The operative word is NEED. Planners should recommend life insurance only if, and to the extent, a need exists. Thus, financial services professionals must first identify the need and then match the type and amount of the product to that need. 

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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