Does Your Business Have Unneeded Life Insurance? A Viable Option

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Many business owners find that life insurance policies that once met their business needs no longer do so. There are many things that can cause a life insurance policy to be no longer needed:

The policy has not performed the way it was projected to perform originally.
The policy was bought to cover a loan or credit loan and the loan has been paid off.
The premium has become to expensive; due to other circumstances, the policy is no longer needed for estate taxes
If the policy was originally bought for a business need, the need could have changed or gone away. We see this happen when a policy might have been bought in the case of the death of a key employee or to fund a buy/sell agreement.

Until recently, businesses with unneeded policies had only two options: 1) lapse the policy with nothing to show for the premiums paid; or 2) if the policy had cash value, surrender it for cash, often for a lot less than the premiums paid into the policy.
Now there is a third alternative.

A life settlement is a transaction where the owner of an unneeded life insurance policy sells the policy for an amount greater than the cash surrender value of the policy. Generally, the insured needs to be at least age 65 years and has experienced a change in health since the policy was purchased.

There are financial institutions that will write what could be a substantial check to the existing policy owner and become the owner and beneficiary of the policy. This can be a viable alternative for individuals, and also for businesses with life insurance policies that for whatever reason are no longer needed.
Whether your business owns term, universal, or whole life insurance, you may feel that the policy is no longer needed, and a life settlement can be a very attractive alternative. Before entering into a life settlement, however, you should consult your attorney and/or your CPA. Make sure that you shop your policy to several potential buyers and always show the offer they received in writing. Also, make sure that the broker handling the transaction has your best interests at heart, not just theirs.


About the Author:
Irving R. Katz, President of Katz Financial LLC, is a Family Business Coach. Irving specializes working with Business Owners who are looking for solutions to growing and maintaining their businesses so that it remains and sustains the family. He is an expert in Retirement Planning, Wealth Creation, Wealth Retention, The Blueprints For Tomorrow ProgramTM, and Estate planning for his Business Owner clients. Find out more about Irving by visiting http://familybusinesssecrets.com/



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