11 Dec, 2012

Life Insurance: A vital tool of Estate Planning


Estate planning is one of the significant elements of any financial plan. It is the distribution of your assets among your loved ones if something were to happen. These assets work as a protection for your loved ones and help in fulfilling their needs when you are not around. There are numerous tools through which you can indulge in estate planning. Life insurance is one of the significant tools as it serves solution to your versatile objectives. Mostly life insurance is taken as a wealth generating tool but in actual it is an instrument which offers financial support to your family when you are no more.


Types of Life Insurance


Term Life Insurance

This is the simplest form of life insurance without anything added. In this policy a lump sum amount of money is paid to the beneficiary in case of your death. A term life plan offers you coverage for a pre-set time period which can vary from 1 year to 30 years. There is also an option of yearly renewable policy in which the premiums keep on increasing every year. This policy doesn’t offer cash value accounts.


Whole Life Insurance

Also known as straight life insurance policy or permanent life policies, it is a term insurance summed with savings accumulation benefit. In this policy a lump sum amount is paid to the dependants of the insured in case of his/her death. Whole life insurance is a safe investment through which you can make some tax free savings. The premium in this policy is higher in comparison to term insurance because of the savings element.


Using Life Insurance for Estate Planning


Here are different ways that life insurance can prove helpful for estate planning-


Providing protection to your loved ones


The main purpose of buying a life insurance is to provide the family with financial support in case of the death of insured. Usually after the death of the insured his/her assets need to go through a probate process before they can be utilized by the beneficiaries. In such a situation life insurance can be of great help as the life insurance funds are immediately accessible.


Estate Building


Life insurance can provide money to create or enhance an estate that your dependents can rely on.


Estate Protection


Families who have their own business can have family members who do not earn their livelihood from the business. However, every member has a share in the estate and after the death of a member the estate is set to be divided into equal units which are small and uneconomical in size. To avoid such a situation, parents take life insurance policies for the members who are not actively involved in business so that they can get the equal amount of money as they were suppose to receive on the division of estate.




When we think of retirement planning, the first thing that comes in mind is the pension plans. But there are very few who know about the benefits of whole life insurance in retirement. Once you get all the savings in hand, you can convert the cash into annuity which can be used as income after retirement. And if you assign these policies to your children’s name, then they can utilize them for meeting their financial goals.


Make donation to charity


Through life insurance you can donate a set amount of money to your favorite charity. Funds gifted to charity are estate tax-deductible.


After the death, the beneficiaries of even a wealthiest person can experience temporary distressing financial troubles. In such a case life insurance can be of great help as it provides immediate cash when it is required the most. It can be used to provide funds to beneficiaries, pay debts off, for education of children and more.


Browse through www.ifmglobal.in to consult an experienced financial consultant and find out which life insurance policy is best to suit your estate planning needs.

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