Term Life Insurance

Monday, March 27, 2017
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Life Insurance 101

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What are the Uses of Life Insurance?

Life insurance has many uses for both individuals and businesses. Some common uses include:

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. For more information go to Key-Person Insurance in the advanced life section.
  • Business Continuation - Life insurance can be used to fund a buy/sell agreement or stock redemption plan to determine enable a partner or group of employees to buy the business interest of a deceased partner. For more information go to Business Continuation Planning in the advanced life section.
  • 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.