A. Life insurance is a fundamental part of a responsible and reliable financial planning strategy. However, many people assume they can only use life insurance for limited functions, such as paying off mortgages or funeral costs at the time of death. The truth is, life insurance can be highly versatile, customizable, and often perfect for creating a sanctuary against the unpredictability of the future.
We will discuss 6 uses of life insurance products most people haven't thought of in this mini blog series.
Benefits 1. Equalizing Inheritance
In an ideal world, most of us would prefer to offer an equal inheritance to each of our heirs. Unfortunately, the nature of your assets may make this impossible. For instance, it can be challenging for more than one person to share an inherited home or business. Life insurance can provide a solution to this problem, by allowing you to give the monetary value of an asset — in cash — to one heir, while leaving the asset itself to another heir.
In other words, rather than liquidating the asset and distributing the cash amongst each person in your family, life insurance can provide a cash value equal to that of the asset itself. A family business owner can therefore give a business to one of his or her children, while also giving the value of the business (in cash) to the children uninterested in running the company. An insurance policy that offers a cash alternative to certain assets can help you balance out complexities in financial planning — and give you a clearer view of how to organize the future.
We will discuss benefit 2. Protecting Business with a COLI in next blog post.