BeamaLife Blog

The economics of life insurance relate to human life value, which in turn pertains to human capital. Human capital is a person’s income potential over their lifetime as well as additional factors such as fringe benefits, monthly expenses, and savings growth rate. The human life value concept is the primary reason for insurance and the basis of the ‘survivorship need’.

 The ultimate goal is to maintain your assets and pass them on to your family in the event of premature death or even if you live your full life. You want your family to receive the full value of your working life if you were to die prematurely. Also, you don’t want the government to end up as the biggest heir to your estate, if you die wealthy. Upon your death, tax on your assets is inevitable if you fall in the estate tax bracket. But understanding the economics of life insurance will allow you to cover what is due by creating a source of funds to pay estate tax liabilities through affordable premium payments in the form of a gift to an Irrevocable Life Insurance Trust. Furthermore, the death benefit from your life insurance policy to your loved ones has no federal estate tax, no state inheritance, and no federal or income state tax consequences if life insurance policy is structure in a correct manner.

The economics of life insurance also concerns tax-deferred growth. By law, the cash value growth inside a permanent life insurance policy is tax deferred. This makes a permanent life insurance policy especially whole life insurance a tremendous savings vehicle and provides great value for any individual with tax concerns. Lastly, the growing cash value inside a whole life insurance policy is increasingly used to fund children’s education, retirement savings and wealth creation purposes.