How Life Insurance Insulates Heirs from Market Risks

Legacy planning is an important topic for most individuals who have children and grandchildren. The ability to leave behind assets that can work to substantially ease the future financial burden faced by heirs is a powerful motivator to many and creates the ultimate reward after a life spent working hard.

While all of your assets can contribute toward your overall legacy, one of the most important assets to have is a life insurance policy. A life insurance policy not only ensures your heirs a certain amount of money upon your death, it also helps to insulate them from the market risk your other assets may bring to the table.

Investment Losses vs. Life Insurance

When you leave an investment portfolio to your heirs, there is nothing that protects them from a swift decline of stock values after your death. This decline can occur no matter how carefully you researched and invested because stock prices are based on much more than just the value of a company. In fact, a global economic crisis that does not directly impact the companies you've invested in could still result in lost value for your heirs at a time when they can least afford to face it.

With a life insurance death benefit, even in a variable policy, the death benefit is predictable and secure as long as there was no misrepresentation on the application for coverage, no outstanding loans against cash value, the death was not caused by one of the excepted situations, and the premium has been paid on time. No matter how the market fluctuates after death, that benefit remains the same.

Assets and Estate Taxes

A decline in the value of the assets you plan to leave behind does not have to occur just after your death, it can even begin occurring while you are alive and there is little you can do to stop it other than sell your assets, take losses, and then find another place to invest your money. On top of the losses, your heirs may also be required to pay estate taxes, especially as the estate tax exemption falls substantially in 2013. With a life insurance policy, as long as there are no instances of ownership, your heirs can likely avoid estate taxes no matter the exemption amount.

If you are ready to strengthen your estate plan with a life insurance policy, give us a call at Alexander & Strunk Insurance today. We can help you create the best, most effective plan for your heirs.