Last month I shared four valuable benefits of life insurance. Here are four more reasons to own cash value life insurance:
1. Life insurance is discounted estate tax
Federal estate tax returns on January 1, 2011, because of sunset provisions in previous legislation. The exclusion returns to $1 million and the maximum rate increases to 55 percent. Americans who were not subject to estate tax will now become eligible. Do you want to pay these taxes with whole dollars or would you prefer a discount instead, using pennies to buy dollars? The answer is obvious! Life insurance provides that discount.
2. Life insurance is fully funded contractual will insurance
Regular wills have many inadequacies. Even when they work, they proceed through probate, incurring costs and opening your affairs to the scrutiny of the public. When wills don’t work, your desires can be contested at great cost and can even be declared invalid. Life insurance “wills” have none of these problems and even fully fund your estate for the determined value at the time it is needed.
Think about this: People surrender other assets and put proceeds into life insurance, which is a fully funded contractual will. Few, if any, surrender life insurance to invest in stocks, bonds or real estate.
3. Life insurance pays what someone else would have to pay
Someone always pays for life insurance. Heads of the households, if insurable, pay for their life insurance with a few dollars from their income. If they do not, and they die too soon, then someone else, a widow, an orphan or a business inevitably ends up paying costs that would have been covered by life insurance.
The cost of life insurance isn’t the problem. It is actually inexpensive and eventually profitable for our clients. Real costs are food, clothing and shelter; not to mention the loss of a parent’s time with the family. The real cost is not knowing how to make ends meet and needing to continue to work instead of retiring. These issues exact a heavy cost. Life insurance policies are inexpensive in comparison.
4. Life insurance is transferred risk
Many fathers have daughters who are married to inadequately insured husbands. To whom does the risk transfer if the husband dies prematurely? Answer: The father. One solution: Insure the son-in-law. Have the cash value belong to the father and the death benefits belong to the daughter. There is no more risk for the father. The risk has been transferred.