Having life insurance is a great way to fill your financial gaps. It can pay your family a death benefit and help your business continue. In addition, it can help with cash value growth, which is tax-deferred.
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Pays a Death Benefit
Upon the policyholder’s death, the life insurance pays a death benefit to the beneficiary. The use is usually a lump sum, but the policyholder can receive it in installments, too. The amount of the payment depends on the policy, but in general, the beneficiary will not pay income tax on the death benefit.
The beneficiary may use the funds for any final expenses. They may also use the money to pay off debts or other costs. The remainder of the death benefit can be invested, donated, or left to a loved one.
Some insurance companies, like Mountain Insurance, offer an accelerated death benefit. This allows the policyholder to prepay their death benefit while still living. To qualify, the policyholder must have a terminal illness, long-term care illness, or a specified disease. They must also prove a short life expectancy.
If the policyholder fails to pay the premiums, the insurance policy will lapse. This is an excellent opportunity for the policyholder to reinstate it, but a medical exam may be required.
Can Help With Business Continuation
A solid business continuation plan is essential to keeping your business afloat in the event of a key employee’s death. It can also be a valuable component of a succession plan, allowing other owners to acquire the deceased’s share of the business.
To plan for the future, business owners should ensure they understand the basics of business continuity and the benefits of business life insurance. A good strategy would be to hire an independent life insurance agent focusing on business continuation. Erie Family Life has life insurance solutions for funding business continuity plans. They can also help with employee benefits such as deferred compensation.
In the event of a key employee’s unexpected death, business life insurance can help keep the business afloat. This can be done by providing funds to cover the costs of replacing the key employee. In addition, this insurance can also help mitigate the loss of leadership and financial stress.
Cash Value Growth is tax-deferred
Using life insurance for tax-deferred growth is a great way to protect your loved ones. It can provide peace of mind and allow you to pay for unexpected expenses. It can also allow you to secure a loan for any purpose.
You can take out a loan against your life insurance to pay for college tuition, buy a car or make a down payment on a home. Using life insurance for tax-deferred cash value growth can also allow you to make a retirement plan.
Many people use the cash value to pay for their insurance premiums. Some also use it to buy more insurance or a higher death benefit. If you borrow against your life insurance, the amount you owe the insurance company is subtracted from your death benefit.
You can receive a tax-free loan if you borrow against your life insurance policy. The loan is not taxable until the policy is in force. Depending on your policy, you may also be required to pay surrender charges if you withdraw money from your cash value account.