Life Insurance in Utah

Life insurance has been described as a “self-completing savings account,” and a person can use life insurance to offset a savings account, whether within or separate from the account. If the contributor to that account dies, the full value of the account is paid to the beneficiary regardless of whether it is in the first year of the policy or the 30th year.

Life insurance can be used to secure debt against the possibility of loss. If a person purchases something like a home, or business, or equipment, or even a car or a boat, or something like that, and takes out a life insurance policy that pays off that debt and a death to the breadwinner occurs, the surviving family has the things they need to continue on.

Life Insurance in Business

Life insurance is often used in business in many ways. One of the most frequent uses is to fund a Business Buy-Sell agreement. If two people are partners in a business, and one should die, the remaining partner is then in business with the deceased partner’s heir. That heir is then entitled to half of the business proceeds whether they are able to contribute to the business or not. A Business Buy-Sell agreement, drawn up by an attorney, establishes a value for the business and directs the business owners to fund the agreement by purchasing life insurance on the business partners for half of the value of the business, and making their partner the beneficiary of their life insurance policy. The Business Buy-Sell agreement then directs the life insurance to be used by the partner to pay to the partner’s heirs to purchase their half of the business. The result leaves the business in the surviving partner’s hands alone, and the deceased partner’s heirs have received the fair value for the half of the business that they owned because of the partner’s death.

The same principle applies to a corporation owned by two or more people, only it is called a Stock Purchase Plan. At the death of a stockholder, the life insurance that the company has on them is paid to the company and the company is directed to pay the heirs the value of the stock, which is the amount of life insurance on the stockholder. The company then owns the stock and the heirs have received the payment for the stock’s value.

There is another type of life insurance used to secure the future for businesses that have highly skilled or specifically talented employees. If an employee has great value to a company, and it would cause a financial hardship on the company if the employee should die, then the business can write a life insurance policy on the employee that will give them money to search and/or train a replacement should the employee die while in the company’s employ. This is called Key-Man Insurance. Often the Key-Man Insurance can be funded with a permanent cash-value insurance plan that the employer can use to incentivize the employee, letting them know that if they will stay on as an employee until they retire, the cash value in the life insurance policy will be theirs to do with what they wish, in addition to their retirement, when they retire. This is often called “Golden Handcuffs” in the insurance business.

The Importance of Life Insurance

Purchasing life insurance is dependent on three things: Age, good health, and money. The better your health is, the less expensive it is, and the younger you are, the better your rates will be. So buy as much as you can afford at the youngest age you can while in your best health. Your family will be glad you did!