Life Insurance to Protect the Family Farm
Why a Farm Owner Wants Life Insurance Coverage
As a farm owner, you work hard every day. You want to protect that hard work for years and be sure that your farm is transferred to the next generation as efficiently as possible. It is expensive to keep your farm running and maintained ā costs you want whoever inherits your farm to be able to afford. This is how life insurance can help.
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Life insurance can help protect your farm keeping it in the family by providing your heirs with the cash they will need to pay for expenses farms can incur. From livestock to crops to new facilities and estate taxes that may be due life insurance creates the liquidity needed to pay these expenses so that your farm can continue to operate the way you would want it.
Here are several reasons farm owners will want life insurance protection.
Farm life insurance can be used to pay estate taxes after your death
The proceeds from a farm life insurance policy ensures your beneficiaries don’t have to sell the farm land to cover the various estate taxes. The fact is farm land is extremely valuable, but is not very liquid (able to be converted into cash quickly.)
Estate taxes are generally due 9-months after the owners death. This leaves the beneficiaries little time to come up with the money. If they don’t have the cash on hand, their only other option may be to sell the farm land.
With a life insurance policy in place, your loved ones have the time they need to grieve and make sound financial decisions about what to do with the farm. They can keep the farm and all the memories that go along with it.
Life insurance death benefits can help cover the costs of maintaining the farm after you're gone
Your family will still need to keep the farm running after you’re gone, and life insurance can help with that. The death benefit from a policy can be used to cover the costs of things like:
-Hiring someone to run the farm
-Paying off business debts
-Making repairs or improvements to the farm
-Covering the costs of farm animals
Life insurance can give your family the financial security they need to keep the farm going after you’re gone.
If you have a partner who helps run the farm, they can be named as a beneficiary
If you have a partner who helps run the farm with you, they can be named as a beneficiary of your life insurance policy. This way, if something happens to you, they will still have the financial support they need to keep the farm running.
Life insurance can provide money for heirs to purchase the farm
If you have heirs who are interested in taking over the farm, life insurance can provide them with the money they need to purchase it from your other beneficiaries. This can help your family keep the farm in the family for generations to come.
Types of Life insurance Best For Farm Owners
Permanent life insurance like universal life or whole life are best for farm owners with estate planning goals. Universal life insurance provides lifelong protection and builds cash value that you can also be used to provide income in retirement. Whole life insurance pays a death benefit no matter when you die and also has a cash value component that you can access while you’re alive.
On the other hand, if cash flow is an issue, consider a guaranteed universal life policy. The premiums for this type of coverage are lower than other permanent life policies and can still be designed to provide a death benefit until age 121.Ā
Be cautious though; if you survive past the age of 121, a guaranteed universal life policy will end, and all the premiums will be kept by the insurance company without providing a death benefit.
