Life insurance was once viewed as a means of risk management to protect against financial loss in the event of a person’s death. Today, it’s a vital part of an overall strategic financial plan and a necessary funding mechanism for businesses. 

To a certain extent, all families and business operate with financial goals. Whether these plans are formal or informal, they tend to rest upon the reliance of either a stream of income, in the case of a family, or the continued ownership or managerial participation of particular individuals, in the case of a business. Either of these presumptions can be devastated by the death of an individual. The main purpose, of life insurance, for financial planning purposes, is to provide a measure of economic protection to those who would suffer financially if the insured died.

Too often, life insurance is left out of the financial planning process. Nearly one in three Americans believe they need more life insurance. Many households have no insurance at all, or, if they do, it may not be enough to adequately address their financial objectives.

^{Source: LIMRA Facts About Life, September 2017.}

Common Life Insurance Uses

• Life Insurance as a Cash Vehicle: Certain permanent life insurance contracts offer a cash value component offering the ability to accumulate cash value on a tax-advantaged basis. When structured properly, distributions can be income-tax-free and can be used for a variety of purposes including funding an education or supplementing retirement income.
• Life Insurance in Retirement Planning: Qualified plans such as an IRA or 401(k) have contribution limits. Permanent life insurance can offer an additional opportunity to use cash value to supplement retirement.
• Life Insurance in Estate Planning: Life insurance can be used in estate planning to address debt, taxes, lost income, estate equalization, or charitable contributions.
• Long-Term Disability Insurance: Long-term disability insurance is designed to replace a percentage of gross income on a tax-free basis should a disability prevent the insured from earning an income.

^{Source: LPL Financial}