Life Insurance & Annuities
What Are the Uses of Life Insurance?
For generations, families and business have relied on the financial security that life insurance provides. The proceeds from life insurance are generally free from federal income tax, and can be used to help pay off mortgages, fund children's educations and enable families to continue their standard of living. Here are some of the personal and business uses of life insurance.
Personal: The primary function of life insurance is to protect a family's financial future.
- Final expenses — Proceeds provide beneficiaries with an immediate supply of cash that could be used to medical bills, funeral expenditures, probate costs and other related expenses.
- Mortgage protection — Insurance can be used to cover the amount of a mortgage or rent payments, so that your loved ones can remain in the family home.
- Income replacement — A sudden loss of income can have a harmful impact on the lives of surviving family members. Life insurance proceeds can allow your family to maintain its lifestyle.
- Estate planning — Although the future of estate taxes is unclear at this time, your planning should be based on the tax law as it exists today. For those individuals who may be affected by estate taxes, life insurance proceeds can be an effective way to pay the taxes and other costs associated with estate settlement. We do not offer estate planning services (see our Legal Notices). However, we will work with your estate-planning attorney (or other expert) to recommend the type of life insurance that is right for you.
- Charitable giving — Life insurance can help multiply your generosity to your house of worship, alumni association, or favorite charity while also providing a valuable tax benefit to you.
Business: Insurance can help business owners ensure the financial future of their business.
- Business continuation — When an owner or partner dies, life insurance proceeds can allow for a smooth transition of the business to family members, the new owners, or surviving partners. The proceeds can also help provide liquidity in an estate.
- Key person — Most businesses have indispensable individuals whose contributions are highly valued. Insurance coverage can help ease the financial damage caused by a loss of such key employees.
- Executive bonus — Life insurance can be used to reward selected key employees with a valuable tax-deductible benefit, while also providing important tax benefits to the employer.
