Broker Check

Insurance: Different Strokes for Different Folks

| December 28, 2018
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Have you ever thought about the valuable role life insurance can play in helping you achieve a variety of important financial objectives? Let’s look at some “slice of life” examples, and we’ll see how life insurance can have broad applications. 

First, consider this hypothetical scenario: A young married couple, Kim and Sean Olsen, have just had their first baby. Kim, previously employed full-time, has decided to work part-time so she can devote most of her time to being with their new child. How would Kim manage financially if Sean, now the primary means of support in the family, were to die unexpectedly? 

Since most couples just starting out in life have not had enough time to accumulate a lot of money, life insurance can help provide an instant estate, thereby assuring that money will be available in the case of an untimely event (such as an early death). Based on the specific needs to be met, such an instant estate could help provide annual income for the surviving spouse, money to help pay the mortgage on a house, and funds to help pay for a child’s education. 

Next, let’s consider the hypothetical case of Angela Robb and Mark Jeffers, two partners who have worked hard to build a successful electronics business. How could they protect their respective business interests should one of them die or wish to sell their share? 

In this situation, the two partners could set up a buy-sell agreement funded with life insurance. Simply put, a buy-sell agreement establishes the conditions under which one partner would buy, and the other (or his or her heirs in the event of death) would sell, shares of the business. Because partners typically may have much of their personal wealth tied up in the business, life insurance can provide the means (i.e., the cash) to accomplish their objectives. 

Finally, let’s consider David Summers (a hypothetical case), the owner of a family business who wishes to keep the business in the family. How could his business be protected from potentially high estate taxes that might require selling the business to raise the necessary cash? 

Again, life insurance could be used to provide cash to help pay estate taxes when a significant amount of personal wealth exists in an illiquid (not readily convertible to cash) form. 

While the hypothetical examples above have been described in very basic terms, they demonstrate how life insurance can provide “different strokes for different folks.” By identifying your family’s short-term and long-term financial needs, you can develop a plan to help assure that money will be available to meet your objectives.  Be sure to contact your insurance agent for help with your specific situation.

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