Ideas, tips and news about life insurance and the uses of life insurance

Business life insurance is an extensive topic that can’t be covered in one blog post but here’s some data to start with. There’s a helpful article on business life insurance from The Baltimore Sun that speaks to the often neglected concern of what happens to a business (and the business owner’s family) if an owner or key employee should die. What happens to the ownership? What is the financial loss if a key employee, whether an owner or not, should pass away? What would be the reaction of customers? Of suppliers? Creditors?

The best way to avoid this uncertainty is to have business life insurance.

From the article: “Life insurance can provide for the successful liquidation of your financial interest in the business, thereby protecting your heirs. If the business is to be sold outright after your death, the insurance policy will provide working capital for the transition period. A related type of insurance is “key person or key man” insurance, which compensates your company for the loss of any employee who is vital to the business. If a business has multiple owners, each partner could have a life insurance policy to trigger an automatic buyout of the deceased partner’s interest.”

The two most common types of business life insurance are life insurance to fund a buy-sell agreement and to cover the financial loss of a key employee. You can find out more about how to structure these types of business life insurance by talking with the experts at lifeinsure.com.

The Motley Fool has a recent article about how whole life insurance has had a resurgence among 30 year olds.The author takes the common viewpoint of the financial media that one should buy term life insurance. The author at least says: “It’s not that buying a whole life policy is such a terrible idea.”

The problem with this article and other similar ones is the generality. There is never an “always”.(except for that generality!) As the author says: “Most 30-somethings would be better suited to lock in rates with a 20-year level premium term policy. When you reach your 50s, consider reducing your coverage amount and perhaps using a shorter 10- or 15-year term. If you don’t think your insurance needs will fall in 20 years, you can get a 30-year level term policy right away. “

There is a problem with this logic. Having been in the insurance business for many years, I don’t know of a single beneficiary, (spouse/children) who is or would be thrilled that the term life insurance policy that their spouse or parent has been paying for 20 or 30 years is suddenly at zero at age 50 or 60.

I do know of people who buckled up, thought long and purchased whole life insurance in their 20’s, 30’s and 40’s who now have a wonderful legacy for their family and have opened up choices in financial planning that they wouldn’t have had if they hadn’t made that commitment.

This is not to say that term life insurance is not a great financial tool. It is, if one is limited in their income and savings choices. The first and most important move if you have loved ones who depend on your income is to have life insurance and to have a substantial amount that really replaces your income. Sometimes term life insurance is the only choice but if one is doing well financially and takes care of their retirement programs and other savings programs, then whole life insurance can be a superior choice and enhance the other asset pools.

It’s interesting that about three quarters of Americans think that life insurance is too expensive to put into the family budget but the facts are different.

Term life insurance has reached its lowest costs in history because people are living longer and because of competition among life insurance companies.

This info comes from a recent study shown in a recent article in earthtimes.org where David Woods, the president of Life Insurance Foundation for Education