Term Life
Insurance That Grows
Author: Ivon T. Hughes
As your business
grows, the net worth of the business increases. If the business is co-owned
with one or more partners, and one of the partners dies prematurely, the
business may face unexpected financial hardship. In addition to losing the
deceased partner's abilities to generate revenue, the remaining shareholders
may need to buy out the deceased’s share in the business with proceeds
payable to his/hers estate.
If you want
to protect your business from this scenario, then the Pick-a-Term Life Business
Protection strategy is the answer.
How Does it Work?
The Business
Protection strategy revolves around a Death Benefit that increases to reflect
the value of your growing business.
A Case Study:
Bill and Fred own an architecture firm with a growing lists of customers.
The company is a privately owned corporation. The retained value of the company
is $1 million. Bill and Fred each own 50% of the firm.
Bill and Fred
are both 45 years old, they are non-smokers and in general good health. They
figure they need $500,000 to pay the other partner's estate in case of early
death. They estimate the company's retained earnings will grow 2% per year.
They plan to work until 60 before retiring.
You recommend
that the company buy a $500,000 Joint-First-To-Die Pick-a-Term policy with
a 15-year term and a death benefit which increases by 2% per year to reflect
the estimated growth of their business. The company owns the policy, pays
the premiums and is the designated beneficiary. Upon the death of either
Bill or Fred, the death benefit is paid out to the company, which uses the
proceeds to buyout the shares of the deceased, with the money going to the
deceased’s estate. The remaining death benefit (if any) over and above
the cost of the shares, can be deposited in the Capital Dividend Account,
and paid out as a tax-free dividend to the remaining shareholder.
Pick-a-Term
Life features include:
An increasing death benefit of between 1% to 8% each year. The maximum death
benefit can be as high as 300% of the initial death benefit.
The ability to select a Term Life Period to match the time you plan to retire
or sell their business.
The option to pre-pay the insurance premiums to lower the total cost of the
policy.
A Guaranteed Surrender Amount available at the end of third year on pre-paid
policies. It can be as high as 90% of the unused pre-paid premiums.
Renewable insurance at the end of the term at a Yearly Renewable Premium
rate.
The option to convert to permanent insurance before age 65 without additional
underwriting.
For Joint-First-to-Die coverage option, an additional death benefit payable
to the beneficiary if, after the first insured dies, the second insured dies
within 90 days.
See for yourself how this new strategy can benefit your clients by clicking
the button below to run your own Pick-A-Term Business Protection projection.
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Ivon T. Hughes, The Hughes Trustco Group Ltd.
Online Insurance Broker - Get a FREE Quote TODAY!
Tel: (514) 842-9001 Email: [email protected]
Web: http://www.trustco.ca
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