JK Lasser's New Rules for Estate, Retirement, and Tax Planning, 6th Edition
by Stewart H. Welch III, J. Winston Busby
CHAPTER 10Using Insurance in Your Estate Plan
The average family spends some 10 percent to 15 percent of its disposable income on insurance premiums. You would never consider owning a home without property and casualty insurance that would replace it should it burn to the ground. Most people feel the same way about health insurance. The potential costs of medical care are just too expensive to try to self‐insure. In this chapter we focus on two types of insurance that play an important role in protecting your estate plan—life insurance and long‐term care insurance. Another vital type of insurance, liability insurance, will be covered in Chapter 15.
Life Insurance
Life insurance serves three important purposes in your estate plan. If you have not accumulated enough financial assets to provide financial independence for yourself and your family, life insurance provides a means of replacing income should the family income earner die prematurely. Second, if you have accumulated enough assets to be subject to the death tax, then life insurance can be used as a source of cash to pay estate taxes. Finally, life insurance can be used to leverage the size of your estate. We will cover each of these issues in this chapter as well as discuss the various types of life insurance policies, under what circumstances each is appropriate, and the amounts of life insurance you will need.
Life Insurance Basics
Before we discuss the best use of life insurance in your estate plan, let's first ...