Mortgage, Life & Disability Insurance
When purchasing a home usually the largest asset most people hold there is a need to protect it. Mortgage life and disability insurance either makes the mortgage payments if you become disabled or pays the mortgage off completely in the event of death leaving your major asset free and clear for your family.
Permanent Insurance Policies
There are basically two types of insurance term and permanent. Term insurance like the name implies is for a term in 10, 20 and 30 year increments usually ending at age 75 or 80. Permanent insurance runs for the life of the client guaranteeing a payout or death benefit that a policy holder can not outlive. Permanent insurance is known by various names like Term 100 Universal life and Whole life. Permanent policies quite often allow for the accumulation of cash values that can be tax sheltered and can be used to pay future premiums or be used to supplement retirement income.
Estate Planning
When considering estate planning Life insurance can play a major role, for example it can provide the necessary funds on the disposition of an estate when a capital gain is triggered. Another example is the need to provide the funding of an annuity or replacement income to a family member and of course the need to fund last expenses.
Buy/Sell Agreements
Insurance can play critical role in funding a buy sell agreement where typically two or more business partners need to fund the buy out of the interest of a deceased partner. This is usually done by purchasing an insurance policy equal to the value of the partner’s interest. In the event the partner dies the proceeds from the insurance policy funds the companies capital dividend account allowing the company to buy out the deceased business interest, these policies are usually purchased by the company using corporate money.
Related article: Ready to sell your business? Life insurance can make it easier for everyone (The Globe and Mail / PDF)
Key man Insurance
Companies that have an active sales force that count on a few key salespersons for most of their production could find themselves without the sales they need to continue or grow if a key person dies. Key man insurance would fund the loss of income from that key person and fund the training of a replacement using corporate money to pay for the coverage.
