Life insurance is crucial to estate planning because proceeds from policies can be used to:
REPLACE INCOME
Your
family may lose your income once you die. Proceeds from the insurance
policy can be invested to produce income to replace some or all
of the lost earnings
PAY ESTATE EXPENSES
People
often underestimate the cash required to pay expenses resulting
from the funeral, income taxes, estate administration and probate
fees, and other debts payable. The proceeds from an insurance policy
can save your family from these burdens.
LEAVE AN INHERITANCE If you don't own a lot of assets, this is one of the best ways to provide for your loved ones. Key Question #1
With
estate planning in mind, what types of insurance should be considered?
Here
are the most common:
5Whole
life can be expensive but works as an investment and provides
a death benefit; it builds a cash value that's tax- deferred
5Term
insurance has no cash value and is less expensive
5Universal
life has a term insurance component and a tax-deferred savings
or investment component
Key Question #2 How much insurance do you need? Ideally, you must try to balance affordability with what you think your beneficiaries will need. Examine your debts, income needs, occasional and regular expenses and expected future expenses. On your death, the proceeds from an insurance policy go to the designated beneficiary. If you have minor children, you may want the proceeds to be held in a trust created in your will. If you are part of a closely held business where associates are shareholders, insurance proceeds allow the surviving associates to acquire your interests. You'll need the help of a lawyer, accountant and insurance agent or financial adviser with this situation. | 
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