Can life insurance act as a wealth strategy for your family? The short answer is “yes,” but a more detailed look at this question reveals that there are some clever, strategic ways you might implement life insurance to help protect your family and your assets. Today, we’ll be taking a look at how you can put life insurance to work in preserving your family’s wealth.
Protecting Your Business
Let’s say you have a business. What will happen to that business and the income your family was relying on in the event of your passing?
You need to have a plan in place to ensure proper business succession and that your family can be compensated. This is where something like a buy-sell life insurance agreement might enter the picture:
- – You select a successor for the business
- – You create an agreement that establishes a suitable value for them to
- buy the business for should you expire
- – Successor purchases business for agreed upon price using payout from life insurance
- – Your heirs receive compensation and don’t have to worry about what happens to the business
And this is but one example of life insurance protecting your family. You might also use insurance to help replace lost income in other circumstances, which is what we’ll be taking a look at next.
Life Insurance And Lost Income
Perhaps you have a successful job where you’re making plenty of money and providing for your family. You’ve got some years left until retirement, though, and this could pose a potential risk to your family.
Should anything happen to you, a large chunk of your family’s revenue is out the window, but life insurance could help make certain your family would still have money coming in. If you plan out your yearly income, multiplied by the number of years you have left until retirement, you can work out an amount that would protect your family should you pass and cannot provide a steady income.
Other Ways Life Insurance Fits Into A Wealth Strategy
In addition to making up for lost income, life insurance can present you with several other advantages as part of your wealth-building strategy:
– It can provide a substantial death benefit payment for beneficiaries with relatively low premium payments
– Those benefits will not decline as long as you pay your premiums
– Death benefits are often tax-free
– Funds from life insurance are divorced from future equity and debt markets
As part of an overall plan to preserve wealth for your family, life insurance is one component that you shouldn’t overlook, so make sure to do your research on what kind of policy would best benefit you and yours in the long-term.