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Life Insurance in Financial Planning

Life insurance for women is a crucial part of financial planning for the whole family. Imagine the matriarch of your family becoming ill or passing away. A tragic event will not only result in an emotional loss but a substantial impact on the operations of the household as well as the finances.

Life insurance is the ultimate form of financial protection for your family and loved ones. Many people have historically used life insurance as a risk management tool, however it also plays an important role in a diversified and comprehensive financial plan.

There are many uses of life insurance in financial planning. Here are some of the most popular.

Income replacement - Most people get life insurance for income replacement to help ensure loved ones have funds to pay their bills and stay in their home. If you are in your primary earning years, general 35 to 55, income replacement is essentially important. During these years, the risk of death may be low, but the pain point should death occur is very high. There will be a lot to deal with, both emotionally and financially for loved ones.

College planning - Another use of life insurance is putting a policy in place and leveraging the cash value to pay tuition. If this is part of your comprehensive financial plan, you will need a long runway or high rate of return to build enough cash to be able to pay tuition.

Retirement planning - Life insurance is not an investment, but it does have that savings component. Life insurance can be another “bucket,” like your 401k or Roth IRA. It can be a conservative component in your portfolio that allows you to invest tax-deferred dollars, and unlike other vehicles, control the flexibility and the options. If properly put together and funded, you can take out a tax-free income over a period of time to supplement your retirement income.

Tax diversification - In Life insurance policies with cash value, the cash value grows tax-deferred and the beneficiaries are paid federal income tax-free. Under IRS code 1035, older contracts with a cash value that is not performing well can be exchanged for a newer policy tax-free.

Estate planning - The goal for using life insurance in estate planning is to make sure you are passing your estate efficiently and in the manner that you intend. There will be expenses that come along with an estate. Life insurance provides liquidity to pay for some of those expenses and estate charges. It can be a tool for transferring wealth to a family member in the most efficient and cost effective way possible.

It is important to explore ways to use life insurance as part of your comprehensive financial plan to meet your goals. To get started, contact us for a quote on life insurance or call us directly at 888.893.2105.


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