Advantages of whole life for business owners
7/29/2010 12:00:00 AM
As a business owner you probably have a million questions and concerns running around in your head all the time. One way in which insurance can help alleviate some of these concerns is through purchasing a whole life insurance policy. How can this be?
One helpful benefit is that a whole life policy creates an income tax shelter. Within the whole life policy, unlike a term-life policy, there is cash value that builds up. Part of this cash value is from the premium dollars contributed by the policy owner, and the other portion is from investment returns earned by the insurance company. The buildup of this cash is tax deferred. If an emergency happens within your business, the cash value also provides some amount of liquidity by allowing you to borrow against it if need be. As you repay the amount borrowed, and as long as you make the interest payments, the borrowed funds are not taxed.
Other benefits of a whole life policy can be provided through business operations. For instance, the policy can provide funds for a buy-sell agreement through a cross-purchase or stock redemption arrangement. This option can be very helpful if the company does not have enough liquid funds. Another important benefit is the option to purchase a second-to-die policy. These policies are meant to provide cash to meet estate taxes required upon the death of the remaining spouse. Since two policies are not being purchased on each spouse this type of policy actually lowers the cost of insurance and allows for a higher death benefit to be purchased. Estate taxes can be very costly and this type of policy has been growing in popularity in order to help absorb some of those expenses that none of us like to think about.
From these basic examples it is easy to understand why a whole life policy on the business owner’s life can be beneficial. These benefits can reach into the life of the owner, the family of the owner, and the operations of the business. Depending on your specific situation there are many possible solutions a whole life policy can provide. Contact your local Tallahassee Marks Insurance agent and ask them how you can make a whole life insurance policy work for you!
One helpful benefit is that a whole life policy creates an income tax shelter. Within the whole life policy, unlike a term-life policy, there is cash value that builds up. Part of this cash value is from the premium dollars contributed by the policy owner, and the other portion is from investment returns earned by the insurance company. The buildup of this cash is tax deferred. If an emergency happens within your business, the cash value also provides some amount of liquidity by allowing you to borrow against it if need be. As you repay the amount borrowed, and as long as you make the interest payments, the borrowed funds are not taxed.
Other benefits of a whole life policy can be provided through business operations. For instance, the policy can provide funds for a buy-sell agreement through a cross-purchase or stock redemption arrangement. This option can be very helpful if the company does not have enough liquid funds. Another important benefit is the option to purchase a second-to-die policy. These policies are meant to provide cash to meet estate taxes required upon the death of the remaining spouse. Since two policies are not being purchased on each spouse this type of policy actually lowers the cost of insurance and allows for a higher death benefit to be purchased. Estate taxes can be very costly and this type of policy has been growing in popularity in order to help absorb some of those expenses that none of us like to think about.
From these basic examples it is easy to understand why a whole life policy on the business owner’s life can be beneficial. These benefits can reach into the life of the owner, the family of the owner, and the operations of the business. Depending on your specific situation there are many possible solutions a whole life policy can provide. Contact your local Tallahassee Marks Insurance agent and ask them how you can make a whole life insurance policy work for you!