For businesses
The benefits
Life Insurance for Businesses
A clever wealth
management tool
How life insurance helps
Upon death, instead of selling assets to cover debts, taxes etc., life insurance proceeds can be used to pay:
- others if an inheritance are insufficient or unfair;
- taxes e.g. death/estate taxes;
- business or family debts/expenses; and
- philanthropic commitments.
Other purposes
Business succession and continuity
Life insurance can help fund payments to a business partner’s relatives after that partner’s death.
Additionally, the remaining partners can use the life insurance policy proceeds to buy the deceased’s equity in the business. That cash in turn can provide money for the surviving family of the deceased.
A valid investment tool
A properly designed life insurance policy is a clever asset. It offers investment diversification which protects against market fluctuations in stocks, bonds and real estate.
Tax benefits.
Life insurance qualifies for significant tax benefits including tax-free death benefits in most countries. The policies also allow the cash value inside the life policy to grow tax-deferred.
You can also access the cash value of life insurance policies on a tax-favored basis through withdrawals or policy loans. For example, you can withdraw cash from a life insurance policy on a First-In, First-Out basis. This means that withdrawals up to the amount you have paid in (the premium) are considered tax-free.
Asset threats
To protect physical assets a Private Placement Life Insurance policy can be put in place. For more, check PPLI.