Life Topics – Purpose of Life Insurance

Life Topics
The purpose of life insurance is to guarantee, at the time of the insured’s death, the specific amount of funds to be paid to each beneficiary.
Purpose of Life Insurance
A life insurance policy has several purposes:
  • Maintain an income for the family:
    Life insurance benefits are used to offset financial losses in case of death of the policy-holder.
  • Mortgage and loan protection:
    If a person has outstanding debts or loans at the time of death, life insurance benefits will help offset them.
  • Insurance for a key person:
    Death of a key person in a business can result in bankruptcy. Benefits in case of death are a tool to help a company overcome such a crisis.
  • Buy-Sell agreements:
    In the event of death of a partner, some partnerships require that the surviving partner buy the deceased partner’s interest in the business. Life insurance is a way to cover these acquisition costs.
  • Estate Protection:
    If an estate incurs taxation upon death of its owner, life insurance can cover tax payments to protect the value of the estate.