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Does Life Insurance Play a Role in the Success of My Financial or Estate Plan?

Insurance policies are an important part of your overall wealth plan. They are purchased to protect against an unexpected loss which could cause your financial or estate plan to fail. 

While life insurance is not compulsory in developing financial and estate plans, it does offer an opportunity to fill gaps in the plan in an efficient manner. Financial and estate plans can be developed without the use of insurance if you are uninsurable or wish to use other alternatives. 

The type and amount of insurance needed is dependent on what stage of wealth building you are in, as well as your financial and estate planning priorities. 

In the early stages of wealth-building, life insurance is used primarily to protect against the loss of future earnings of the income-producing wage earners. If an unexpected death occurs, meeting expenses of the current lifestyle and future savings goals such as retirement or a college education are jeopardized. 

During your primary mid-life earning years, life insurance may be used to increase the children’s inheritance on an income tax-free basis, or to replace a portion of inheritance expected to be consumed during retirement.

If and when you reach the point where you have more assets than you will use during your lifetime, you might use life insurance to replace assets that will be lost at death to estate taxes. Insurance may also be purchased to benefit charities and causes that are important to you. 

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