3 Signs It’s Time To Consider Life Insurance as Part of Your Wealth-Building Strategy
Written by
Laura Bogart
Edited by
Kristen Mae
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You deserve a bright future. Your belief in yourself and your passion to build a legacy of happiness and success that will echo through generations are powerful motivators. And it’s all paying off. You’re making more money, and, even more importantly, you’re thinking about ways to grow that money into lasting wealth. And that process can require you to think outside the box.
Perhaps you haven’t thought of life insurance as a way to build wealth. After all, isn’t it there to protect your loved ones in case you pass away — especially suddenly? Well, yes. But it can be much more than that.
Used strategically, life insurance can be a powerful wealth-building tool. You just have to know when it’s time to add it to your overall financial plan.
1. You’ve Added Dependents
Some changes to your life are incredibly joyful — like getting married or welcoming a child to the family. Naturally, you want to make sure your loved ones are protected if anything happens to you. A solid life insurance policy can help ensure they can maintain their lifestyle or at least cover essential expenses in your absence.
But life insurance can do more than provide a death benefit. With a whole or universal life insurance policy, you can build cash value on a tax-deferred basis and potentially borrow against that cash value to help fund major goals, such as buying a family home or covering your children’s college tuition.
2. You’ve Started a Business
Whether you’ve dreamed of opening a comic book store since you were a kid or recently launched a handmade soap company, building a business takes serious commitment — and protection.
That includes getting adequate life insurance coverage for yourself and any partners. With proper life insurance, you can not only protect against the loss of a major stakeholder; you can also help repay any business debts or taxes.
Life insurance can also be used to fund a buy-sell agreement — a legal contract between co-owners that outlines how ownership interests will be transferred in the wake of a major event such as death, disability, or even one owner simply walking away. This kind of planning is essential to ensure business continuity and can prevent disputes among surviving owners or heirs.
3. You’re Thinking About Estate Planning
You don’t have to be nearing retirement to start your estate planning in earnest. In fact, the sooner you incorporate estate planning into your wealth strategy, the better positioned you’ll be in the long run.
If your goal is to become (or you already are) a high-net-worth individual, life insurance can provide critical liquidity to cover estate taxes and help ensure your assets are distributed according to your wishes. Without it, your heirs might be forced to sell real estate, stocks, or other valuable assets quickly, increasing the risk of taking on a loss.
A qualified financial advisor can help you find a policy designed to offset federal estate taxes, as well as any state inheritance or estate tax obligations.
Life insurance can also help you plan fairly for your heirs. For example, if one child is passionate about taking over the family business or a specific real estate property, you can use a life insurance policy to leave a comparable death benefit to another child, ensuring a more balanced and harmonious estate plan.
Bottom Line
It’s always worth exploring how life insurance might fit into your financial toolbox, but there are certain circumstances that call for a closer look. If you’ve added dependents, launched a business or started thinking about estate planning, now is the perfect time to incorporate life insurance as part of your wealth-building strategy.
Looking to build a legacy? Check out our Life to Legacy guide for expert advice and smart moves you can make today.
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