The most important use of life insurance has been to ensure sufficient capital in the estate to allow the deceased’s dependents to maintain the standard of living they enjoyed while the deceased was alive. Other uses of Life Insurance are to provide capital for both Personal needs as in mortgage (*see mortgage insurance) and/or corporate needs (*retirement compensation, Buy/Sell, Key Person Coverage). Life insurance is well suited to these applications, as it provides a tax-free lump sum payment upon the death of the insured.
An insurance advisor will prepare a “financial needs analysis” to determine the amount of insurance required on the death of the individual. This involves an analysis of:
(1) sources of income that will continue to be available on the death of the life insured;
(2) capital assets that can be liquidated to provide income;
(3) tax and other liabilities that will arise on death; and
(4) the income needs of the dependents/corporation/partners.
Should there be a shortfall between the income / capital available on death and the needs of the dependents, insurance can be used to create additional capital. We use various techniques, programs and insurance carriers to ensure the best solutions are achieved.