Why The Wealthy Should Have Insurance - Part II

December 20, 2019

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Business Owners Should Definitely Have It

If an entrepreneur co-owns a business, life insurance can fund a buy/sell agreement in the event of an owner's sudden death. A family business will benefit from a key person insurance policy. This is insurance on the main person in a small business, usually the owner, founder, or key employees.

This policy protects the firm from going under in the event that key personnel pass on before a replacement is in place. An added benefit of these types of insurance policies is that the premiums are usually deductible as a business expense.

Life Insurance as an Asset

Life insurance is more than a death benefit. Depending upon the type of insurance, it may have a cash value or intrinsic value. Thus, when the insurance is no longer needed, it can be sold as a life settlement.

Whole life insurance, properly structured, can offer steady tax-free dividends. Although not guaranteed, many insurance companies have been around for up to a century. The cash value in the policy also builds up and can be used as your own private bank for a variety of income-producing activities.

Finally, with whole life insurance, your death benefit is guaranteed regardless of your future health. This is important long-term security for the policy owner’s family and heirs.

Life Insurance Strategies

There are a variety of insurance scenarios to choose from. The right one may depend on, say, how your current retirement fund gets taxed. Consider these three examples:

Retirement Plan Funds Life Insurance Strategy

Wealthy individuals’ retirement plan funds—both IRAs and 401(k)s—are taxed twice: First as income and, next, with an estate tax. James has $900,000 in his IRA. To avoid losing a large percent of his IRA to Uncle Sam upon his death, James buys a second-to-die insurance policy with his $900,000. Upon James’ death, his wife receives the $3 million tax-free benefit.

Transfer Current Life Insurance With Cash Surrender Value Policy to Increase Death Benefit

Kevin had a 10-year-old second-to-die insurance policy worth $850,000 with a death benefit of $1.53 million. His advisor recommended he do a tax-free insurance policy exchange. The new policy had an increased death benefit of $3.48 million and there were no out-of-pocket charges.

The Two-Step Annuity Tactic

Sarah buys an immediate joint-life annuity for $1 million, which pays $43,843 annually as long as Sarah and her husband are alive. Next, Sarah uses the annual $43,843 payout to fund a $5.68 million second-to-die policy. In essence, Sarah converted $600,000, the after-tax value of the initial $1 million, into $5.68 million. Finally, both the annuity and death benefits are guaranteed.

We know you want to manage, preserve and grow your wealth. Properly structured life insurance can help with all these goals.

Keeping you protected.




All Access Insurance in Littleton, CO,  who represents multiple insurance companies as a “Broker” and provides products for auto, home,  commercial, workers compensation, and much more! Call us today for a free quote at (303) 932-1700.