The power of life insurance
When conversation turns to life insurance, most people assume this coverage is primarily geared toward protecting the family when the policyholder passes away.
Indeed, life insurance can be used for this purpose, but it’s far from the only one. Life insurance can cover a tremendous array of situations in life. For example, it can cover an individual’s financial needs like paying off a mortgage or can be used as a retirement plan.
It also has applications in business, estate planning and tax strategy. Read on to find out much more about what life insurance can do for you.
Financial loss of an employee
Some employee are just too valuable to lose. Losing these high performers would have a significant financial impact on the business. To mitigate this risk, a business can insure these employees. Typically, these policies name the business as the beneficiary.
This coverage is not limited to high value employees only. Any employee can be insured including the owner. The amount of coverage can vary depending on the employee’s importance to the business.
An assessment would be done on the financial impact of losing that employee or owner on the business, which would consider factors such as: lost sales, lost clients, lost innovation, difficulty to replace that employee and training costs for the new employee.
Business partner buyout
Another application is buying out your business partner. If your partner were unable to carry on in your business due to their failing health or worse because they died, you would have to decide what happens to their shares. You may want to buy them out but may not have the money to do so.
Life insurance or critical illness can be arranged to give you the funds you need to buy out your partners’ share of your company. You would get life insurance or critical illness on each other’s lives with the opposite partner as the beneficiary of the funds.
This would provide the money to ensure that the surviving partner gets to keep the business and the deceased partner’s family is properly taken care of. Just remember to also create a legal agreement to ensure that these wishes are respected when a partner dies.
Cash value policies, also known as universal or whole life insurance can provide for your retirement. These policies can be an alternative retirement solution for many as your funds grow tax-sheltered just like an RRSP, there is no limit on contribution level and you have the ability to access tax-free income upon retirement.
And there’s much more that life insurance can do for you. Call us today to see how these plans can work for you.