Death and taxes: Nothing in the world is more certain, as the saying goes. We can’t cheat death. But we can be better prepared for it.
For farm families, life insurance is like planting seeds of financial protection now and in the future. The primary reason for purchasing life insurance is the need to protect those you love financially in the event of your death.
The proceeds from a life insurance policy can be used to help pay for a number of financial needs, such as making mortgage payments, paying down debt to be put toward college expenses, or helping to fill other financial gaps. Whole Life, a type of permanent insurance can also be used to help supplement retirement.
Put Yourself On To-Do List
“We know not everyone is equally informed, confident or comfortable talking about their need for life insurance,” says Alex Vasichek, a licensed Agriculture-Focused Financial Planner in Fargo, ND. “Oftentimes a family member will reach out to us after a friend, neighbor, or distant relative passes away. That’s why we’re here.”
“We believe life insurance should be viewed as an important risk management tool,” adds Vasichek, “similar to other insurances, such as vehicle, equipment, or crop Insurance.”
…life insurance should be viewed as an important risk management tool..
How Much Insurance Is Right for Your Situation?
So how much life insurance do you need? There’s no one-size-fits-all solution, so you’ll want to take into account considerations specific to farmers and other agricultural businesses. Your policy should be carefully tailored based on a combination of important financial and lifestyle factors, including:
Amount of debt owed
Size of your family
Annual income and income replacement needs
Standard of living
Education expenses
Legacy planning
What Type of Life Insurance May Be Right for You? There are two main categories of life insurance—Term and Permanent
Term Life
Provides coverage for a fixed period of time—often 10, 20, or 30 years. If you die while covered by the policy, the death benefit is paid to your beneficiaries.
There is no cash value accrual, which can generally make these policies far less expensive than permanent policies.
May appeal to those who are looking for affordable coverage for a specific time, such as the length of your mortgage or for the years you’re raising a family—so that if you were no longer in the picture, that coverage would be there when your family may need it the most.
Provides coverage for a fixed period of time—often 10, 20, or 30 years. If you die while covered by the policy, the death benefit is paid to your beneficiaries.
There is no cash value accrual, which can generally make these policies far less expensive than permanent policies.
May appeal to those who are looking for affordable coverage for a specific time, such as the length of your mortgage or for the years you’re raising a family—so that if you were no longer in the picture, that coverage would be there when your family may need it the most.
Is Life Insurance Taxable?
It’s important to remember, regardless of which type of life insurance you choose, premium payments are generally not tax deductible.
Life insurance proceeds typically are not taxable, however the interest accrued on the proceeds from the date of the insured’s death may be taxable.
If you have specific questions, you should consult with a tax advisor or legal consultant.
Spring Into Action
Now that your crops are in the ground, it might be a good time to take a few minutes to meet with a licensed life insurance professional, who has the specialized skills to write a customized agricultural-focused life insurance solution that fits you, your family, and your legacy.
Alex Vasichek is the owner and financial advisor at Elevate Financial in Fargo, North Dakota. He is a registered representative of and offers securities through MML Investors Services, LLC, Member SIPC. Supervisory office: 100 South Fifth Street, Suite 2300, Minneapolis MN 55402, 612-333-1413. Elevate Financial is not a subsidiary of affiliate of MML Investors Services, LLC or its affiliated companies. CRN202704-6301536
