You’ve worked your whole life to build what you have and you’ve acquired copious amounts of net worth. Having life insurance in place is always a good idea, even when you have vast means to leave to your beneficiaries after death. We’ve reviewed a few of the biggest reasons high net worth individuals need life insurance.
Life Insurance & The Death Benefit
Life insurance covers all the incidentals that happen when a person passes on. There are medical expenses to cover of which some will come in after a patient’s death. The cost of medical care continues to go up every year and having these expenditures covered by life insurance will be a lifesaver for your family after you’re gone. There are also personal and business debts that you most likely would have in a situation like this, especially if you pass on unexpectedly. Instead of having your estate and assets being sold off to pay off your creditors, your life insurance would take care of your debts and your estate would be untouched.
Life Insurance & Estate Tax
Speaking of estates, the Estate Tax is also something to consider whether to take out life insurance for high net worth. Under normal circumstances, your heirs would receive less from your bequeathment due to the estate tax owed if the estate is valued over the tax threshold. That threshold number changes every year, so it’s not set in stone as to what the number would be on any given year. This is another expense that your life insurance would take care of after you’re gone. There are other intangibles to think about as well such as college expenses for your grandchildren and living expenses for your heirs.
The Benefits of Life Insurance
Having a life insurance policy is peace of mind for you and your heirs. Having the policy in place protects them in the event of your passing and takes care of them after you’re gone. There are two kinds of life insurance that are usually used, term-life and whole-life insurance. Term-Life insurance is what it sounds like, for a term of time. You can purchase the policies for a set number of years up to 20 years. Should you pass during that time frame, then your benefits would be paid out to your heirs. The advantage of term-life insurance policies is that the premiums cost less when comparing the same amount of coverage. Whole-Life insurance, just as the name implies covers the entirety of your life. Consequently, you can build up quite a large amount of insurance coverage over that time frame.
For more information on life insurance for high net worth individuals, please contact us at Chandler & Knowles CPA. We have provided finance and tax planning for individuals and businesses since 1996, and we can use our knowledge to consult with you on your unique situation.