Some people teach that life insurance is primarily for the accumulation years ... when assets are building ... kids are being raised ... college funding is important ... etc. Some people think that once wealth is "achieved," there is no longer a need for life insurance. They think they can become "self-insured."
What they miss is what life insurance adds to the retirement picture. While subject to underwriting and other considerations, permanent life insurance, even for seniors with significant assets, provides more options. Life insurance can be the key that "unlocks" other assets ... giving seniors more financial security and more spendable dollars.
Cash from a death benefit can pay off debts, provide cash for the continuation of a business, replenish cash or assets used for medical expenses, replace income lost from reduced Social Security benefits, or replace a lost or reduced pension benefit.
A life insurance death benefit may also prevent other assets from being sold on a less than favorable basis. For example, if the market is down ... invested assets may remain in the market while the life insurance cash provides for immediate needs.
When a donor dies, many times his or her charitable giving also dies. Life insurance can provide a final cash gift to the senior's favorite charities.
Life insurance may also be used to equalize an estate. Suppose the senior owns a farm that is gifted to a child active in farming. A life insurance death benefit can help "equalize" the estate by giving cash to the other children—not involved in the farm.
Even if there are not federal estate taxes due, many estates are impacted by income tax. A life insurance death benefit can help pay the taxes due at death on deferred annuities or Savings Bonds. The additional cash provided through a life insurance policy may also help strengthen the value of an IRA or 401(k) by offsetting the income taxes due at distribution.
Even more significant, permanent life insurance enables a senior to spend and enjoy more of his or her wealth during retirement, knowing that the life insurance death benefit will ultimately replace the consumed assets.
****Life Insurance products contain fees, such as morality and expense charges, and may contain restrictions, such as surrender periods. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Guarantees are based on the claims paying ability of the issuing life insurance company.
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