An Unexpected Lesson In Love

What do life insurance and love have to do with each other? More than you would think.

When I started my career, I was tasked with hand-delivering a death benefit check to a widow who lived in my area. The husband had owned a business, and his family’s livelihood depended on his company’s continued success.

The couple’s daughter had been married at the family home on a beautiful spring day. The wedding reception was held in their backyard. While guests celebrated the happy occasion, the bride’s father took a quiet moment to impart some wisdom to his child before she embarked to her new journey. As he turned to speak, he collapsed. The widow later told me that he had died immediately of a massive stroke.

Lesson Of Love

Years before he walked his daughter down the aisle, the patriarch realized that money would be needed if something unexpected happened to him and he was no longer around. He loved his family deeply and wanted to take care of them no matter the circumstances. That’s why he invested in life insurance through his company.

The couple never could have guessed that years after taking out the policy, one of their family’s greatest milestones would quickly turn into one of their worst. Nor could they know that because of this simple financial transaction, the emotions of the tragic day wouldn’t be made worse by looming financial insecurity.

Because of his act of love, the life insurance proceeds were available after his death to help pay for his daughter’s wedding, provide his widow with an income and help the family wind down his business.

It turns out that this was the only life insurance death benefit I ever delivered. I’ll never forget the unexpected lesson. You buy life insurance because you love someone.

You Owe It To Them And To Your Company

Of course, love isn’t the only reason to buy life insurance. In business, there are many reasons. Buying life insurance on a key person is one good one. You owe it to them and to your company.

If a key person dies, the company not only has to deal with the loss but also could face a plethora of challenges and could stand to lose a lot financially. The company may have its debt called. The loss of the key person may result in lost sales. Finding a replacement could be an expensive and lengthy endeavor.

And some of the company’s financial loss may be because the business owes that person’s heirs money. For example, if a key person owns stock in a closely held business, life insurance proceeds can be used to buy the stock from the key person’s estate.

Similarly, if that executive has a deferred compensation agreement with the company, life insurance proceeds can generate the liquidity needed to make good on the promised compensation.

September is Life Insurance Awareness Month, and I encourage financial professionals working on holistic financial plans to talk to their clients about what will happen to their loved ones if they were no longer there to provide for them. I also encourage you to talk to your clients about the potential challenges their business could face if a key employee is lost.

Steve Parrish, JD, RICP, CLU, ChFC, RHU, AEP, is adjunct professor of advanced planning and co-director of The American College Center for Retirement Income. He may be contacted at steve.parrish@innfeedback.com.