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BENEFICIARY SERVICES

215 West Loucks Street

Sheridan, Wyoming 82801-4226

Phone: (307) 459-4653 Fax: (413) 751-9511

We Are Here To Help You Make The Most Of Your Estate Plans

For Additional Information and Pricing Please Contact Your Equity Planner

What is it? Why is it needed?

All life insurance shares a common purpose — to protect against the often large financial burden created by an unexpected and premature death. If life insurance is in effect at death, the insurance company will pay the death benefit to the beneficiary named in the policy, subject to policy provisions. Life insurance benefits protect a business or family when they may be most vulnerable to the problems caused by a lack of ready cash.

When the deceased is the owner of a family business, surviving family members may be faced with the double financial devastation of watching the family's largest asset — the business — dwindle in value or even fail, at the same time that the business may not be able to continue the owner's full income for financial support of the family. In many cases, other family members also work in the business so that all sources of family income are jeopardized.

In some business situations, the owner's purchase of adequate personally-owned life insurance with benefits payable to their personal beneficiary — a spouse or other family members — could be all that is needed. Using life insurance benefits to replace the family income allows surviving business partners, employees, or family members to utilize all business income and assets for business needs — thereby protecting the often largest asset in the estate of the deceased. The extra cash that otherwise would have been needed to provide immediate and ongoing income to the family may be just the cushion needed to allow a healthy business to survive the transition period following the owner's death.

In other cases where a business is highly leveraged or in an especially competitive market, there is often a need to own insurance on the life of the owner(s) and any employees having major responsibilities within the business. The life insurance may fund a formal Buy Sell Agreement, or Key Person coverage may be purchased with less formal documentation of the underlying purpose for the insurance. Employees that are essential to the survival of a business, whether they have an ownership interest or not, are referred to as "key" persons. It is quite common for a business to own Key Person insurance on one or more individuals that play key roles in obtaining credit, maintaining customer, outside contractor, or vendor relationships, or that have major responsibility for business production or project completion.

What type is best?
There are two basic types of life insurance: Temporary insurance, which includes Term Life and Group Life and is expected to provide coverage for a limited time period — generally from 10- to 30-years depending on your need and your age at issue, and Permanent insurance, which includes Whole Life, Universal Life, and Variable Universal Life and is generally purchased with the expectation that lifetime coverage will be needed. The choice between temporary and permanent insurance will be based on your reasons for needing protection, how long you will need coverage and, most importantly, the budget you have for premium payments.

Term Life is one of the simplest, most cost-effective types of pure life insurance. Generally, it provides the largest immediate amount of protection for the lowest initial cost. If you want no-frills insurance protection only, and not a savings and investment product.

With Term Life, beneficiaries are paid the policy death benefit amount if death occurs during the policy term, typically from 10 to 30 years. When you apply for term life insurance you select the number of years for your premium to be level. Choices of 10, 15, 20, 25, or 30 years are available, depending on your current age. Once your application is approved and the insurance company issues your policy, the premiums won't change during the entire guaranteed level premium term. However, if your situation changes and you decide months or years later that you no longer need the term life insurance, you may simply stop paying the premiums and your policy will end, or lapse. You are not obligated to continue paying premiums to the end of the initial term selected.

People who purchase Term Life generally have a substantial need for insurance protection during a specific period of time. They may be young and have growing families, or they may have a business that requires large amounts of short-term debt. It is also possible that they need permanent insurance but the premium budget is not enough to pay for the amount of permanent protection needed. In this situation, many term life insurance policies provide affordable protection now with the option to convert to permanent coverage later.

Who buys it and how much?
Your reasons for wanting life insurance will help you calculate the amount of coverage you should buy and how long you will need the coverage. This will also help you determine if your needs are simple and straightforward — such as purchasing additional personally-owned life insurance and designating your family as beneficiary — or if you need to consider Key Person insurance or draw up and fund a Buy Sell Agreement to ensure your business survives you. In many cases, you will be required to have Key Person insurance to pledge as collateral for business loans. Business life insurance may also be used to fund personal financial objectives for retirement income or family financial security.

Your need for life insurance will change throughout your business and personal life, so it's important to understand your options, and periodically review your coverage to be sure it's still right for you. Many times the use of one or more life insurance trusts can well serve personal and business needs to protect a business during transitional times.