Why do I need life insurance?
Life insurance has several purposes. Its most important function is to replace the earnings that would cease at the death of the insured. For businesses, life insurance is a way to protect key employees and the business itself. A third purpose is to use life insurance to pay potential estate taxes.
If you die during your earning years, your family could suffer a severe economic loss as a result of losing your current and future income. Unfortunately, your family would still have to pay its regular bills, the mortgage, and outstanding debts, and perhaps even continue saving for college and retirement. Unless you're independently wealthy, achieving these goals may be virtually impossible for your family with the loss of your steady income. Life insurance offers a way for your family to continue living comfortably and without worry.
Employers often purchase life insurance policies on key employees to insure against the loss of services or income that might result after an employee's death. Here, the proceeds from the policy are paid to the company. Life insurance works for business partners too, where one business partner purchases a policy to insure against the financial loss that might result from the other partner's death or to buy out the partner's heirs.
Life insurance is also used to pay potential federal estate taxes. Since these taxes must be paid in cash, life insurance can be a good way to ensure the fulfillment of this obligation.
This information is provided for informational purposes only. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.
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AXA Equitable Life Insurance Company (New York, NY) issues life insurance and annuity products. Securities offered through AXA Advisors, LLC, member FINRA, SIPC. AXA Equitable and AXA Advisors are affiliated and do not provide legal or tax advice.
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GE 91356 (09/2015)