Why a Billionaire Buys a $201 Million Dollar Life Insurance Policy
According to CNBC, a tech-billionaire just purchased the most valuable life insurance policy ever - $201 million. So why does a billionaire buy a record-setting life insurance policy you ask? Estate planning.
Life insurance policies are great estate planning tools when understood and used correctly. For example:
- If you have minor children, a life insurance policy can be a great way to ensure there is enough money to provide for your children in the event anything ever happened to you.
- If you are a small-business owner, the proceeds from a life insurance policy can be used in multiple ways (e.g. to buy the stock from a partner or shareholder that passes away unexpectedly, or to cover estate taxes upon your passing, etc.)
- Life insurance proceeds can be used to cover what would otherwise be paid or lost in state or federal estate taxes. Depending on the size of your estate, estate taxes could take from 5%-55% of the portion of your estate that exceeds the exemption amount. Life insurance in combination with proper planning, can protect your estate from estate tax losses.
As you can see, you do not need to be a tech billionaire to realize significant benefits from incorporating life insurance as part of your overall estate plan.
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