The Role of Life Insurance in Modern Estate Planning
Most people think of life insurance simply as income replacement. But in today’s financial landscape, it’s a strategic tool used by affluent families, business owners, and retirees to build a solid estate plan. Whether you’re concerned about estate taxes, asset protection, or passing wealth to the next generation, the right life insurance policy can be one of the most effective ways to protect your legacy.
High-net-worth families often use permanent life insurance to create liquidity at death, which can be used to pay estate taxes, fund trusts, or equalize inheritances. Business owners may use life insurance to fund buy-sell agreements, protect against the loss of key employees, or transfer ownership tax-efficiently.
Why It’s More Than Just a Death Benefit
Permanent life insurance also offers living benefits. With proper design, policies can accumulate cash value that grows tax-deferred and can be accessed tax-free via policy loans. This can be used for retirement income, emergencies, or to support long-term care needs.
At Diversified Insurance Brokers, we take a holistic approach to life insurance. We help clients understand the difference between term, whole life, indexed universal life, and other advanced strategies. We also work closely with estate attorneys and CPAs to ensure your insurance fits into your broader financial and legal plan.
Whether you’re just getting started or want a second opinion on an existing policy, our team is here to guide you every step of the way.
Contact Us Today:
Ready to explore insurance and annuity options that offer guaranteed income, principal protection, disability, life insurance, Social Security and Medicare reviews, and long-term financial growth? Let the expert advisors at Diversified Insurance Brokers help you find the right strategy for your retirement goals.
📞 Call us at 800-533-5969
🔗 Visit our annuity rate page here
📍 Contact Us Page
FAQs: Life Insurance in Estate Planning
How does life insurance help in estate planning?
Life insurance provides immediate, tax-free liquidity that can pay estate expenses, debts, and taxes without forcing heirs to sell assets. It can also equalize inheritances among beneficiaries and create a guaranteed legacy.
Is life insurance included in my taxable estate?
Yes—unless it is owned by an Irrevocable Life Insurance Trust (ILIT). Many families use ILITs to remove the death benefit from their taxable estate. Your advisor can help determine whether an ILIT fits your goals.
What type of life insurance is best for estate planning?
Permanent policies such as whole life and guaranteed universal life are commonly used because they provide lifetime coverage. Indexed universal life may also be used when cash value accumulation is desirable.
Can life insurance help cover estate taxes?
Yes. Life insurance is one of the most efficient ways to fund estate taxes, providing heirs with tax-free cash exactly when it’s needed. Many high-net-worth families use policies specifically for tax-liquidity planning.
What is a survivorship (second-to-die) life insurance policy?
This type of policy insures two people—usually spouses—and pays out after the second death. It is often used for estate tax planning because liabilities typically arise after both spouses have passed.
Can life insurance be used to equalize inheritances?
Yes. Life insurance can provide an equal value to heirs when one child receives a business, property, or other illiquid asset. This avoids conflict while keeping the estate intact.
Can life insurance protect a family business?
Absolutely. Policies can fund buy-sell agreements, ensure smooth ownership transitions, and provide cash to keep operations running. Learn more on our Key Person Insurance page.
How do I know how much coverage I need for estate planning?
Your coverage amount depends on projected estate taxes, liquidity needs, business considerations, and legacy goals. Many families use life insurance calculators to estimate needs and then review options with an advisor.
About the Author:
Jason Stolz, CLTC, CRPC, is a senior insurance and retirement professional with more than two decades of real-world experience helping individuals, families, and business owners protect their income, assets, and long-term financial stability. As a long-time partner of the nationally licensed independent agency Diversified Insurance Brokers, Jason provides trusted guidance across multiple specialties—including fixed and indexed annuities, long-term care planning, personal and business disability insurance, life insurance solutions, and short-term health coverage. Diversified Insurance Brokers maintains active contracts with over 100 highly rated insurance carriers, ensuring clients have access to a broad and competitive marketplace.
His practical, education-first approach has earned recognition in publications such as VoyageATL, highlighting his commitment to financial clarity and client-focused planning. Drawing on deep product knowledge and years of hands-on field experience, Jason helps clients evaluate carriers, compare strategies, and build retirement and protection plans that are both secure and cost-efficient.
