Life Insurance Resources

Life insurance policies can be used for individual and companies.  Below are some examples of each.

Individual Uses

  • Funeral – Life insurance proceeds can ensure that there is enough money for proper funeral and burial expenses.
  • Debt – Personal bills, credit card debt, student loans, and personal notes can be covered by life insurance in the event of an individual’s death.
  • Mortgage Protection – The proceeds of a life insurance policy can pay off the balance of a mortgage or provide an income stream to pay monthly mortgage or rent payments.
  • Income Replacement – In the event of an individual’s death, life insurance proceeds can provide a supplemental income stream to ensure that the surviving family members are able to maintain the same standard of living.
  • Education – Life insurance proceeds can ensure that the education costs of the insured’s children are covered.
  • Taxes – Federal estate and state inheritance taxes can be pre-funded using life insurance to preserve the value of an estate.
  • Donations/Gifts – An individual can use a life insurance policy to fund a donation to a charity or leave a gift to a family member.

Business Uses

  • Key-Person – A life insurance policy can be used to protect a business from the loss of income and profits caused by the death of a key employee.
  • Business Continuation – Life insurance can be used to fund a buy/sell agreement or stock redemption plan to enable a partner or group of employees to buy the business interest of a deceased partner.
  • Business Loans – Life insurance protection on a key employee or business owner can be used to pay off the debts of a business in the event of that individual’s death.
  • Employee Benefits – Life insurance protection for employees is commonly included in company employee benefits plans.

There are a number of factors that should be considered when estimating how much life insurance you should carry. They include:

  • Final Expenses – These could be unpaid hospital bills, funeral expenses, unpaid debts, probate costs, and estate and inheritance taxes.
  • Readjustment Fund – This may be used to cushion the immediate lifestyle adjustment that a family must make when a loved one dies. The family may be forced to move, or the surviving spouse might have to look for a new job. In addition, a working spouse may find it difficult to return to work immediately after the death of a partner. The readjustment fund allows for adequate bereavement due to loss.
  • Supplemental Income – After the readjustment period, there should be a consistent income stream to help pay for the family’s living expenses, such as mortgage payments, monthly bills, and daycare.
  • Educational Funds – Adequate funds should be available for the childrens’ education. This might include elementary school, high school, and college.
  • Retirement Fund – There should also be adequate funds available to ensure that the spouse can retire comfortably.
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