Why you should buy life insurance?
Talking about life insurance is never pleasant. Top Estate Planning - No one likes to talk about what happens when you're gone. This is one of the most important guarantees you can get, depending on your financial and family circumstances. I often get asked questions. Why do you need life insurance? Is life insurance worth it to me? In most cases, the answer is yes, and I'll explain why. I think it is wise for most people to get life insurance if they have a spouse or children who are financially dependent. I'm amazed at how many people who have young children and don't have life insurance talk to them. Zero zilch. I am. Some might even say they have life insurance because of their job. Usually, this is about 1-1.5 times the total annual income. If you're a homeowner, it doesn't even cover the rest of your mortgage. Do not oppose your child's education. Or replace your spouse's income. If you are one of those people (you know who you are), stop reading now and get life insurance. If you're wondering how much life insurance you need, talk to a financial professional who knows more about your financial plan.
Why should I buy life insurance?
Protecting your family from financial hardship is the most common reason people buy life insurance. Often this is the only reason people consider life insurance. However, there are several reasons to buy life insurance. Some of the reasons include family protection, business loan guarantees, business sales contracts, key business employee guarantees, estate planning, and future planning. Not all of this applies to everyone, but let's take a look.
Why you should get life insurance: Protect your family
I've discussed this briefly before, but I'll say it again because it's the most common reason to buy life insurance. Life insurance is necessary if you have dependents. You may have a spouse who struggles to make a living without an income. Perhaps you still have children who cannot support themselves. Perhaps you will help a dependent parent (financially or simply help). Perhaps you are helping a brother or sister who is unlucky or disabled. If you die in one of these scenarios, you will need to make some (sometimes drastic) changes in your life in order for your financial dependents to survive.
Don't delay, you can get it later. Today you may die in a car accident on your way to work or on your way home. Cycling can kill you with a heart attack. I can't get life insurance because I might get cancer next month.
Your ability to purchase life insurance depends on your health, and costs vary based on your age and health. It's easier to get when you're young and healthy and cheaper when you're young and healthy. People rarely get younger and healthier over time, so don't wait too long. As mentioned above, there are several ways to structure a life insurance policy. Life insurance can be complex at times, so it's important to understand the type of insurance, how much you'll get, and the costs associated with life insurance.
Why Buy Life Insurance: Business Sale/Purchase Contracts
Let's say you are in business and have experience with a partner. Just the two of you Each own the business 50/50. A business can have more than one founder/owner, but for now, I'll keep it simple with two. Let's say you've built a successful business and it's worth $10 million.
You and your partner can enter into an operating agreement (agreement) that sets out the terms of your assets. With a good business plan, you will have a buy/sell agreement that explains what will happen if the two decide to part ways.
If your company's shares are each worth $5 million, you must fully insure the $5 million when you leave your partner. It doesn't have to be a bad breakup – maybe the two of you agree to split up because you want to pursue different interests. Or vice versa. How would you buy $5 million of your partner's stock if your partner leaves you and you want to continue and fully own the business? All this is presented in the purchase/sale contract signed by you. What if one of them dies?
When you die, you'll want $5 million in business capital passed down to your family. You may want your spouse or children to fill the gap by joining your role in the business, but this is not possible. They want money, and your partner does not want to be forced into business partnerships with your spouse and children. And if your partner dies, you don't want to do business with your husband and children.
So the two buy each other $5 million in life insurance. For example, if your partner dies while you're in business, your insurance will pay for you, and you can walk around and buy your partner's stock in practice. Now you own the entire company and your partner's spouse and children own $5 million.
Why You Should Buy Life Insurance: Core Talent Corporate Insurance
Just as key personnel insurance buys and sells insurance, the reason for purchasing life insurance is to provide liquidity in the event of the death of a key employee. Mary is a company accountant and may need to fill in while on vacation. If something happens to you, she will still run the business. Heck, he actually has a business now. She is the only one who handles the company's books. Not a lot of money goes in and out of the company without Mary knowing. She handles all meetings with investors and business partners. If something happens to Mary, the company is in big trouble. What happens when Mary dies? You go up to fill his space. Investors can take your business. Revenue is likely to decline as the company focuses its efforts on filling Mary's position by drawing strength from its core business. Well, if you had life insurance for Mary, it wouldn't fill her shoes, but it would give her that much-needed cash to help her weather the storm.
Smart companies of all sizes will buy life insurance for their key employees. You may have a star salesperson, a key manager, or someone else who is very hard to replace. Life insurance benefits help cover lost income, including rental costs to find a replacement.
Why You Should Get Life Insurance: Real Estate Planning
If you are lucky enough to exceed the federal estate tax exemption (currently $12.6 million), or if you are unlucky enough to live in a state that charges taxes at the time of death, you can get life insurance. To cover taxes. Evaluation. That way, you can pass the property on to your heirs without paying Uncle Sam a check. Now, you need to be strategic about how you do this because if you have a personal life insurance policy, it will be added to the value of your property, which will increase your taxable value. You can avoid this by keeping your life insurance policy in a trust. Work with an estate planning attorney to create the right estate plan for you to make sure everything goes smoothly and works in your favor.
Taxes aside, you may have illiquid assets that you want to leave with your family after you die. A well-known example is real estate investment. There may be many rental properties and some commercial properties. If you have outstanding loans on these assets, the bank will ask you to repay those loans as soon as possible after your death. Otherwise, the property will be confiscated. Your heirs may not have the financial ability or creditworthiness to provide adequate funds to accept these registrations. They may be forced to sell the property at a fire price. However, if you have life insurance to cover the outstanding loan balance, the loan will be repaid to the bank after your death and your heirs will inherit the property for free.
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