Permanent Life Insurance Offers Tax Benefits
When you buy life insurance, you may be better off with term coverage. Term life policies have relatively low premiums because they pay only if the insured individual dies during a certain time period. You might buy a 20-year term policy, for instance, to protect your family until your children are grown. However, term insurance might not be ideal for an indeterminate need.
Example: Ken Collins wants to leave his family business to his daughter Amanda, his chosen successor. He also wants to provide for his other daughter Melanie. To equalize their inheritances, Ken buys $1 million of insurance on his life, payable to Melanie. Ken doesn’t know when he’ll die, so he buys permanent life insurance.
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Copyright © 2009 by the American Institute of Certified Public Accountants, Inc., New York, NY 10036-8775.