Personal & Financial Strategies

Life Insurance and Your Financial Plan

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Nobody likes to think about death, but it’s important to be prepared for the unexpected. Michael Hibbard, of Alpine Bank in Rockford, explains how life insurance can help your family.

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Discussions about death are never easy. Although these conversations can be difficult, they’re also important. At the end of the day, everyone feels better knowing that their loved ones will be taken care of, no matter what life brings. Understanding life insurance can help you to protect your family, your dependents, and even your legacy. There are many reasons why a life insurance policy may be a good decision for you. It can help you to:

Prepare for the Unexpected
Death can happen at any time. Life insurance helps your loved ones pay the mortgage, bills and even college costs after you’re gone. In a time of sorrow, planning ahead can provide some financial relief, making things easier for those left behind.

Cover Funeral Expenses
Funerals are expensive. Once all funeral-related costs are factored in, the average family will spend roughly $8,000-$10,000. At an already difficult and emotional time, life insurance can cover these expenses without creating additional stress on the family.

Protect Loved Ones
In life, you work hard to make sure those you love – spouse, partner, children, family members – are taken care of. It’s just as important to provide financial support for future living costs after one is gone. After all, they will have to go on without you.

Reduce Debt
Death does not have to mean debt. Debt can be a tremendous burden, on top of the emotional turmoil felt by your survivors. Life insurance proceeds can help to cover financial responsibilities left after your death.

Stabilize Your Business
Life Insurance isn’t just for individuals. It can protect a business from financial loss, liabilities or instability in the case of death of a business partner. There are a variety of ways to provide for business continuity utilizing insurance.

Supplement Retirement
A properly designed life insurance policy can be an excellent resource to supplement your retirement years. This could provide tax-free income in addition to other retirement income sources.

Support a Charity
Life insurance can enable you to leave a lasting legacy to an important cause or charity that could be much larger than you would otherwise set aside for donation.

Avoid Estate Taxes
Life insurance can be used as an estate planning tool for transferring wealth to your family and avoiding estate and gift transfer taxes. It can also help provide money for the heirs to pay taxes.

Provide Long-Term Care
Many consumers are reluctant to buy long-term care insurance because they fear that their investment will be wasted if they do not use it. Some insurance companies have attempted to solve this problem by combining life insurance with long-term care insurance. The idea is that policy benefits will always be paid, in one form or another. These products are relatively new and the features are changing as the product evolves. The amount of the long-term care benefit is often expressed in terms of a percentage of the life insurance benefit. If you never need long-term care, your beneficiaries will receive an income tax-free death benefit as long as your policy remains in force. If you do need long-term care, your beneficiaries could still receive a death benefit depending on the amount utilized towards the care.

Life insurance could be an essential financial asset depending on your situation. Even if you already have a policy, it’s important to make sure it still matches your goals. Consult your financial professional to review/discuss your life insurance needs.

Michael E. Hibbard, CRPC, is an Assistant Vice President, Wealth Advisor & Investment Officer at Alpine Trust & Investment Group, with 21 years of experience.

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