The Definition of Insurance

When the question is what asset is need to be insure? For general I’ll answer the Life Insurance, but if it related to asset then business will be the most important to be included in any insurance.

Many entrepreneurs' retained as the main business includes life insurance (or disability) policy that the company's name or family members (or both) as a beneficiary.

Life insurance can play an important role in overall strategic planning process. Within the framework of a long-term strategy Gifting proceeds of life insurance can be used to "balance" between assets and non-active members of the next generation. We say that a small business worth $ 3 million will be paid in time to a daughter who was very active in the business. This can be compensated by a life insurance policy for the same amount for the founder, the name as the main or only son that the recipient practices dentistry thousands of miles away. This "smooths" legacy when the founder dies. A majority of households, industry experts agree that this is not a reasonable solution, but also in the best long-term interests of companies, rather than acquisition of half of the ownership and control of a child who is stronger in-house, the door because he was a teenager.

As good as it may seem at first, the offset is not a panacea, because the assessment can be a moving target. For example, do not you adjust the size of the policy for children with each new assessment of business? If yes, why the child is not active will continue to be a windfall for the effort made by her daughter, whose work has helped to strengthen the company's value? But fair to the child (because the value of money and goods), because it would have a sister "gift" each year when you have to wait for his parents' deaths in parts? This is the dilemma of life insurance, when used as a tool for smoothing, rather than cash or a recurring distribution of other property in the property.

In connection with a purchase-sale between shareholders of a company (or family), life insurance product may be used to finance the purchase of shares under the purchase clause in the shareholders' agreement and therefore plays an important role in the succession planning. A buy-sell agreement of the shareholders for the purchase of each of the other property is often proposed for closely held business owner's death, the mechanism is for an orderly transition of ownership to the other owners. Buy-sell agreements usually contain information on who has the opportunity to buy from a seller (including buildings) that the selling price and how it is determined that the transfer can be financed. If the buy-sell agreement is written for the death of an owner, since life insurance reserves will be a possibility of funding.

Both life insurance reserves and heir, or third-party financing can be used to transfer the business to a continuous operator on the owner's death. A child who operates a company owned by a parent can buy insurance on the life of the parent company to finance the purchase of the property non-business heirs. Life insurance proceeds in a similar manner to support a partnership or a company buy-sell agreement.

Insurance premiums are not deductible from taxes, but income is exempt from federal and state income tax. Since the death never took policy proceeds are not included in his estate. Insurance premiums for life begins when they are purchased and end with death (or earlier), when the insurance proceeds used for the purchase of these assets. In contrast, the cost to the recipient or third party shall not begin until his death, and will continue until the payment is complete.

Related article:

• The answer of General Insurance
• Big parts of Insurance
• Basic of Insurance