Protection Planning Common Questions |
Why do I need life insurance?
Answer:
Life insurance has several purposes. Its most important function is to replace the earnings that would cease at the death of the insured. For businesses, life insurance is a way to protect key employees and the business itself. A third purpose is to use life insurance to pay potential estate taxes.
If you die during your earning years, your family could suffer a severe economic loss as a result of losing your current and future income. Unfortunately, your family would still have to pay its regular bills, the mortgage, and outstanding debts, and perhaps even continue saving for college and retirement. Unless you're independently wealthy, achieving these goals may be virtually impossible for your family with the loss of your steady income. Life insurance offers a way for your family to continue living comfortably and without worry.
Employers often purchase life insurance policies on key employees to insure against the loss of services or income that might result after an employee's death. Here, the proceeds from the policy are paid to the company. Life insurance works for business partners too, where one business partner purchases a policy to insure against the financial loss that might result from the other partner's death or to buy out the partner's heirs.
Life insurance is also used to pay potential federal estate taxes. Since these taxes must be paid in cash, life insurance can be a good way to ensure the fulfillment of this obligation.
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Life Insurance And Estate Planning Questions
- Why do I need life insurance?
- Do I need life insurance if I'm single?
- Is it less expensive to buy life insurance while I'm young?
- What is term life insurance?
- What is whole life insurance?
- What is group life insurance?
- Can I convert all or part of my term life insurance to permanent life insurance?
- Are withdrawals from a cash value life insurance policy ever tax free?
- Can an insurance company require me to submit to a medical exam before granting me a life insurance policy?
- When I die, is my beneficiary required to take a lump-sum payment of my life insurance death benefit?
- Will I be taxed on the growth of the cash value of my life insurance? What if my policy pays dividends?
- Will my beneficiaries have to pay taxes on the proceeds of my life insurance policy?
