Life Insurance

Amy Timmerman, Extension Educator Author

09/23/2024 Added

6 Plays

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For many farm and ranch families, bringing children or grandchildren into the operation is the ultimate goal. Successfully bringing additional family members into the operation may require some creativity as all parties need to maintain a viable standard of living.

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[00:00:00.680]This is Amy Timmerman, Cropping and Water Extension Educator with Nebraska Extension, with today's Extension Update.
[00:00:06.920]For many farm and ranch families, bringing children or grandchildren into the operation is the ultimate goal.
[00:00:14.140]Successfully bringing additional family members into the operation may require some creativity,
[00:00:19.500]as all parties need to maintain a viable standard of living.
[00:00:23.180]Life insurance can be a key tool for farm and ranch businesses to provide tax-free benefits
[00:00:29.280]At the death of the insured, the policy is structured correctly.
[00:00:32.820]Today we will discuss how life insurance should be structured and the different types of life insurance.
[00:00:38.160]Life insurance policies have three parties.
[00:00:41.300]1. The owner
[00:00:43.060]2. The insured
[00:00:44.480]3. The beneficiary
[00:00:46.020]The owner of the policy is responsible for paying for the premium and has the authority to change the beneficiaries, adjust the coverage amount, or surrender the policy.
[00:00:56.300]The insured is the person whose life is covered by the policy.
[00:00:59.700]If the owner and insured are different parties, the owner must have an insurable interest in the life of the insured at the start of the policy.
[00:01:08.340]The beneficiary is the person who receives the death benefits or money at the death of the insured.
[00:01:14.140]In general, for death benefits to be tax-free to the beneficiary, at least two of these parties need to be the same person.
[00:01:21.540]There are two main types of life insurance, permanent and term.
[00:01:26.520]Permanent life insurance can last for the life of the insured as long as the policy premium is or has been paid.
[00:01:32.880]There are several types of permanent life insurance, including whole life insurance, universal life insurance, variable life insurance, and second-to-die policies.
[00:01:44.170]Usually, permanent life insurance policies are more expensive than term policies.
[00:01:48.650]They can be used for estate equalization, funding buy-sell agreements, and paying estate taxes.
[00:01:55.010]The owner of a permanent life insurance policy may also have the ability to borrow from the cash value,
[00:02:01.370]use the cash as collateral for a loan, or receive the policy dividends.
[00:02:06.070]Term life insurance lasts for a specific period of time, as long as the policy premium is paid.
[00:02:13.390]Term life insurance policies are often used for debt coverage and income replacement.
[00:02:18.510]Typically, term life insurance policies are more affordable than permanent life insurance policy.
[00:02:24.290]Additionally, some term policies can be converted to permanent policies
[00:02:28.910]without the insurer needing to go through medical testing,
[00:02:31.950]but only during the conversion period of the policy.
[00:02:35.030]The type of policy that you select will depend on the purpose of the policy.
[00:02:39.670]Future articles will discuss what types of policies should
[00:02:43.150]be used in agricultural businesses for debt coverage,
[00:02:46.250]inheritance equalization, funding buy-sell agreements,
[00:02:49.910]and income replacement.
[00:02:51.050]Life insurance may be a valuable tool to provide liquidity
[00:02:54.670]for a farm or ranch business.
[00:02:56.950]However, depending on your situation,
[00:02:59.630]policies may be cost prohibitive or unavailable.
[00:03:03.270]The amount of death benefit, the insurer's age, health status,
[00:03:07.330]occupation, lifestyle, and other factors can influence
[00:03:11.430]the cost of the insurance premiums.
[00:03:13.570]Some people are simply uninsurable.
[00:03:15.790]If you have questions, please reach out to your insurance personnel
[00:03:19.810]or your local Extension office.
[00:03:21.910]This has been Amy Timmerman with Nebraska Extension.
[00:03:25.110]Thank you for watching.
[00:03:25.270]Thank you.

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Life Insurance

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