Life Insurance: A Versatile Tool

Life insurance can be used for many purposes beyond traditional estate planning and the replacement of income to protect a family’s well-being. Here are a few other common reasons that our clients utilize life insurance:

  • Retirement Funding: Life insurance is unique in that the cash value grows on a tax-deferred basis, while also providing tax-free distributions in the forms of withdrawals and loans.
  • Tax-Advantaged Investing: Many types of policies are available for various investment objectives and risk tolerances. Even alternative asset classes are available in insurance policies, particularly private placement life insurance (PPLI) and annuities. Owners of PPLI policies are often motivated by a desire to minimize income and capital gains tax exposure on their investments rather than a primary focus on a policy’s death benefit.
  • Replacement of Family Assets Donated to Charity: Clients who are charitably inclined often use life insurance to replace the wealth that they donate to important causes. Depending on the charitable gift strategy, sometimes the life insurance premiums are provided by the income stream or tax deductions from the plan.
  • Key Person, Buy-Sell Coverage and Executive Benefits: Life insurance is commonly used to protect a business against the loss of key employees, to provide funding to buy business interests from the heirs of a deceased business owner, and to provide supplemental benefits to executives and owners.

*Loans and partial withdrawals will decrease the death benefit and cash value and may be subject to policy limitations and income tax.

*Private Placement Life Insurance is an unregistered securities product and is not subject to the same regulatory requirements as registered variable products. As such, Private Placement Life Insurance (or Annuities) should only be presented to accredited investors or qualified purchasers as described by the Securities Act of 1933.