There are many different types of policies out there. How do you match your insurance to your needs ? Does your present coverage meet all your needs ? Here is a brief description of what is available and what you should consider when working with an Insurance Agent. To contact an agent, please click here.

For Individuals:

From an estate planning point of view, life insurance can play two roles. If you have not accumulated substantial holdings, insurance creates an immediate estate at death providing funds to meet the resulting expenses and taxes while guaranteeing an income for your family. On the other hand, if you accumulated a sizable estate, there may be significant changes that will arise at death. Insurance is one means of providing the liquidity that may be needed to cover them.

   Life insurance is an ideal financial vehicle since it matures at death. This is exactly when the funds are needed. The annual cost is reasonable and upon receipt, the proceeds are totally free of income tax.
There are two types of life insurance contracts:

• Term insurance is temporary in that it terminates either at a specified age or a given date. Term plans that end at a given date often have renewal provisions allowing coverage to be continued for another specified period, usually ending at age 65 or 70. Term insurance is best used to protect temporary liabilities or commitments such as mortgages, university expenses, bank loans, etc.

• Permanent insurance, on the other hand, is the best type of plan to protect long-term needs such as survivor income or estate settlement costs.

   Group life insurance (which is usually term insurance) has all the attributes of personal insurance in the event of your death. However, your employer or association owns the policy; you are a group certificate holder, not a policyholder, and thus have no control over the contract. For this reason, it is generally recommended that a minimum of 50% of your required life insurance protection be personally owned, ensuring you have ultimate control over your program.

When determining the right amount and type of insurance you should own, consider the following:

• liquid and income-producing assets already available
• the amount of continuing income required by your survivors
• the age difference between spouses, if any
• life expectancy of spouses
• government and private pensions available
• income available for the purchase of insurance

For businesses:

Many companies find it advantageous to purchase insurance on lives of shareholders and/or employees. There are three general purposes:

• funding of buy/sell agreements for the purchase of shares from the deceased shareholder's estate
• collateral security for corporate debts
• providing of funds to indemnify the company against the loss of a key person

Funding the Buy-Sell Agreement

As a source of funds for the obligations under a buy-sell agreement, life insurance is unsurpassed. Since this is the only asset that matures at death, the funds necessary to carry out the terms of agreement will be available exactly when needed. The cost of the insurance is usually far less than the cost of borrowing and, unlike a loan, the insurance proceeds never need to be repaid. The heirs receive cash for the shareholder's portion of the business. The surviving partners or shareholders do not have to impair their cash flow or financial security to finance the purchase.

Creditor Insurance

Creditor insurance is used to insure a business loan. In its most basic form, it involves insuring the life of an individual responsible for the debt or the life of the employee who is most responsible for the success of the business. Creditor insurance helps to ensure that the estate will not be responsible for the amount of the debt and allows the business to continue unencumbered. The advantage to the creditor, if the policy is collaterally assigned to the lender, is the ease of collection upon death of the borrower.

   Life insurance assigned to a lender to cover a loan may receive special tax treatment. A portion of the premium paid may be deducted from the current income while the death proceeds continue to be tax-free to the business. However, certain criteria must be met. An insurance agent in your area can provide details.

Key Person Insurance

Essentially, key person insurance is a policy maintained by a company on the life of an important employee. In the event of his/her death, dollars will be available to partially offset the economic cost of the company of losing and then replacing such an employee. In this case, continued creditor financing will invariably be reviewed and possibly limited or retractor. Life insurance may partially offset some of the financial problems that might arise for the company in such a situation.

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