Buying Life Insurance
Buying Term Life Insurance
Buying life insurance is so very important. It is an integral
fundamental part of any sound financial plan.
The type and amount of
coverage you select will depend on why you need to buy your policy.
You may want to purchase a policy to protect your loved ones in the event of your death.
You may be in business and buy life insurance to guarantee the continuation of the business after death.
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People Who Need To Be Buying Life Insurance
- It seems to me that everyone needs some type of policy
at some time during their lifetime. A single person with no dependents
has no pressing need for a policy as all that is required is sufficient
funds to pay final expenses and probably funds to offset estate taxes.
A single person with children definitely has a need for coverage though. This person needs to calculate how much income
would be required to carry the children through to the end of college
years then determine the amount of life insurance that would provide
this income, before buying life insurance.
A married person with or without children needs some type of
policy as each one needs to make certain that the surviving spouse as
well as the children can survive without his or her income.
may also need to guarantee that the mortgage is paid
off if they have one and if estate taxes are likely to become an issue
then sufficient cash should be provided for this eventuality.
What about business owners?
If you are a shareholder in a small business or a partner you
definitely need some life coverage. Who will own your partners stock if
s/he should die suddenly? You can be certain this deceased partner would
want his or her spouse to own the shares.
Does the spouse know anything
about the business? Will you end up working doubly hard to provide for
his family while his wife learns the business? Does she want to learn
and get involved?
Your business partner may be thinking the same way. What if my
partner dies? There is a simple solution to this problem but you will
end up buying life insurance for certain. Here is how it works.
You have your attorney draw up a buy sell agreement
that would stipulate that the surviving shareholder, or shareholders,
will buy the stock owned by the deceased stockholder at a predetermined
This price should be adjusted each year so that the survivors of
the deceased gets a fair price for his or her shares. Where is the money
going to come from to buy these shares? Each shareholder would have a
life insurance policy on his or her life in the amount of the value of
The policies would be owned by and be paid by the corporation or
the partnership. The corporation or partnership would be the beneficiary
of the policies.
Upon the death of a partner or stockholder the money
paid by the insurance company would be used to buy the portion of the
company now owned by the heirs of the deceased.
What about key man life insurance?
Every successful business has an employee whose absence would be
devastating to the business. What if this employee should die; would the
business continue on profitably?
How long would it take to replace this
employee? How long would this new employee likely take to get up to the
level of your deceased key employee? What would it cost? Determine this
and put a dollar value on it. Buying life insurance in this key person
in that amount is essential.
Regardless of your reason to buy life insurance it is best to select a carrier rated A or better by A.M. Best.
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