Through the years, I have seen clients and friends go through difficulties when the breadwinner of the family suddenly has to go and be with our heavenly Father. This has caused the remaining members of the family to go through hurt and pain and at the same time the uncertainty of not knowing where to get income to sustain them for everyday living.
I really believe preparation time is never wasted time, that what you prepare for years earlier, will set you up for even greater things in the future. It is my dream for more and more Filipinos to live a life of stewardship, abundance, and responsibility. And I really believe that God is setting our nation up for greater and greater things in the future! That as we prepare and go with the desires placed in our hearts, there is no where to go but up! I speak the best for every Filipino working both here and abroad, I really believe that 2013 is going to be our best year yet!
5. To transfer wealth
For the rich who wish to transfer their wealth to their heirs, a single-pay life insurance policy is a sound investment. It guarantees that the heirs will receive their share of inheritance upon the death of the insurer. The amount invested is guaranteed up to 125 percent when the insured dies. What is even better is the tax protection a life insurance product offers. The investment becomes tax free as long as the beneficiary is designated as an irrevocable beneficiary. That way, your heirs receive the full amount that you want to leave them without the government partaking its share. Furthermore, the investor remains in full control over the policy since he is the insured. This prevents the heirs from accessing the money and spending it prematurely.
6. To cover final expenses
Just because you are single and have no dependents does not mean a life insurance policy is useless. On the contrary, singles take out life insurance policies to cover final expenses when they untimely die because they do not want to burden their parents on the final expenses. The proceeds can cover these; and free the parents from additional financial pressure.
7.) To pay off loans
Most of the time, the purchased dream home is finance through a loan from the bank. The bank has the right to repossess or foreclose the property if the amortizations remain unpaid. Being dead is not an excuse to miss payment. That is why banks’ normally require mortgage redemption insurance so that the balance of the loan will still be paid off even with the death of the breadwinner. It’s a win-win situation for both parties. The bank gets the remaining balance and the family keeps the home as a legacy.
For business loans, creditors can be harsh and unsympathetic. It is common for them to demand the payment of the loan when the news of the demise reaches them. This could potentially disrupt business operations, which in turn cause failure. The proceeds of a life insurance can also pay off business loans and leave the family in peace to run the business.
For business loans, creditors can be harsh and unsympathetic. It is common for them to demand the payment of the loan when the news of the demise reaches them. This could potentially disrupt business operations, which in turn cause failure. The proceeds of a life insurance can also pay off business loans and leave the family in peace to run the business.
8.) To pay off estate taxes
Wealthy people who are asset rich but cash poor could face this problem. The government imposes steep tax on the estate. For assets of P10 million and above, the tax is P1,250,000 plus an additional 20 percent on anything above the threshold. That means, if the total estate is valued at P200 million the estate tax give or take is P39 million. If his assets are illiquid, the heirs could face a difficulty in paying off the tax. In some instant, they resort to a fire sale of some assets just to raise the fund. Life insurance answers this problem by providing instant cash for them, which in turn can be used to pay for the estate tax and have the properties transfer to them smoothly.
9. To ensure business continuity
For business partners, the death of one partner is a threat to the existence of the business especially if that partner plays an active role in the operations. Typically, the spouse steps in because she has the right to do so. There is no problem if all of them can work harmoniously together. It becomes one if they can’t. The remaining partners may opt to buy out her share but if they can’t raise the amount needed, then they are stuck with her.
Insurance advisors have since recommended life insurance policy to fund a buy/sell agreement. The agreement is that the surviving partners or shareholders will purchase the deceased’s shares using the proceeds of the life insurance they took out using criss-cross purchase.
In a criss-cross purchase, the surviving partners are obligated to purchase the shares of the deceased partners from his spouse, while the latter is obligated to sell the shares to the remaining shareholders. This way, the business continues smoothly without outside interference.
10. To grow your money
Lest we forget a life insurance plan is also an investment tool (although it still is a life insurance product). The variable universal life insurance has been gaining popularity because the fund is linked to different asset classes such as bonds and equities. With the unprecedented growth of our local equities and the continuing rise in bond prices, a lot of policy holders are reaping the rewards through VULs.
As a matter of fact, some investors are opting for a single pay VUL instead of the mutual funds and unit investment trust funds because the former offers a guaranteed 125 percent in case the policy holder dies, and the proceeds are immediately paid to the beneficiaries. With the latter, the investment form part of the estate of the decedent and will only be transferred to the heirs after the payment of estate taxes.
The next time an insurance advisor sets an appointment with you to present life insurance plans, do yourself a favour and listen to what he or she offers. After citing 10 uses of life insurance, there’s definitely at least one you’ll find beneficial for you. Re post from Chinoy TV host Kendrick Chua
Shared by Coach Amos
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