Life Insurance: Do it for Love or Do It for Money

A friend of mine who has a contract with Prudential recently sent me an ad he had received from them. It was actually pretty good. Directed toward agents rather than consumers, it listed thirty uses of life insurance and their respective support pieces for the agent’s use. But the list of what life insurance can be used for would make an excellent one-page handout for our clients. So, here it is.

Personal needs

• Pay off car loans, credit cards and other debts
• Pay off or reduce your home mortgage
• Fund burial and other final expenses
• Replace income lost due the death of a wage earner
• Fund the costs to replace domestic services of a stay-at-home spouse or caregiver
• Create an education fund
• Protect future insurability
• Ensure a retirement income “completion fund”
• Enhance an estate to provide for the children of a prior marriage
• Satisfy divorce-related obligations such as alimony or child support
• Create a fund to provide care for a loved one with special needs

Estate and charitable needs

• Pay legal and administrative costs incurred at the insured’s death
• Provide a source of liquidity to pay state and/or federal “death taxes”
• Mitigate the impact taxes can have on assets owned in trust
• Supplement any income shortfall of a total return or income trust
• Replace loss due to IRD tax incurred by annuities, IRAs and qualified plan assets
• Diminish the impact of marital deduction limitations of a surviving resident noncitizen spouse
• Increase the value of transfers of generation-skipping, annual exclusion and exemption gift amounts
• Freeze the value of a highly appreciated estate asset received by a surviving heir
• Create a fund to produce an income stream to non-charitable beneficiaries during the term of a testamentary charitable lead trust
• Leave a charitable legacy
• Replace wealth left to a charity
• Equalize inheritances between business heirs and non-business heirs

Business needs

• Collateralize a business loan
• Fund a buy-sell agreement
• Stabilize a business at the death of a key employee or owner
• Fund post-retirement health care costs
• Offset a loss to a business caused by the death of a key employee
• Establish a fund to retain key employees
• Facilitate an ESOP repurchase obligation

Take these ideas, expand them, refine them, revise them and put them to use.

Marvin H. Feldman is the president and chief executive officer of the LIFE Foundation. He can be reached at [email protected].

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