People view life insurance as a contingency plan if something bad happens in life. That view, however, is not the whole picture when it comes to considering life insurance as a planning tool. Life insurance can be a solution to several challenges in estate, business and cottage planning situations. As such, it is not only a contingency plan, but it can be a primary tool to serve a specific purpose in a person's overall succession plan.
Traditionally, the purpose of life insurance is to replace a wage earner’s income in the event of his/her unexpected or premature death. But that is not the full story. Life insurance can be a valuable tool to provide liquidity to pay estate taxes where family wealth is significant but not liquid. It also can provide needed funds to purchase a business partner's ownership interest from a surviving spouse or beneficiaries, and provide endowments and funds to enable next generations to afford the family cottage or farm. Life insurance is flexible to accommodate your life’s plans and situations as they change based on your circumstances.
In summary, life insurance is not just important in insuring against the risk of an untimely death, it is also a planning tool to protect and preserve those assets that are important to future generations.
If you have a significant estate, own a business or are interested in passing on the family cottage or farm, ask your planning professional how life insurance can be an important part of your plan.