Despite these beliefs, many people in a wide range of age groups can benefit from life insurance. The right policy can establish financial security for your family and your business.

Before it's too late, here are six points to consider about life insurance.

1.	The Proceeds From a Policy Are Generally Tax Free

In general, if you receive a life insurance payout because of the death of an insured person such as your spouse, the benefits are not taxable income and do not need to be reported to the IRS. However, if you receive interest payments related to the policy, the interest is taxable income and must be reported.

There are exceptions that can render life insurance proceeds taxable. One example is when a policy is acquired through a transfer for valuable consideration. In that case, you can only exclude from taxable income the amount of consideration you gave, plus any premiums paid after the transfer. (See the right-hand box for more exceptions.)

2.	It Only Replaces Income From Working, Right?

• Many people have misconceptions about who needs life insurance. For example:

  Life Insurance isn't necessary for a stay-at-home parent. Does a non-working spouse need life insurance since he or she doesn't contribute income from a job? Yes, because the surviving spouse will need additional income to replace the many services provided by a primary caregiver of children. And the amount needed is often more than people expect. Plus, whether or not a spouse works outside the home, if he or she passes away, the surviving spouse may need to take time off rather than going back to work right away.

  Life insurance is no longer needed when retirement approaches. If, after retirement, a household only includes a couple living comfortably on their nest egg, they may not see any need to spend money on life insurance. However, if they have a pension that will vanish when one or the other dies (depending on who owns the pension), they should have a way to replace the income. Also, many people help support their elderly parents and adult children so those responsibilities need to be taken into account.

  Even if you plan to spend your entire nest egg during your retirement years, life insurance allows you to leave a substantial sum of money to your children or to a favorite charity as a legacy.

  3.	A Policy Can Provide a Source of Emergency Cash

  If you own a whole life insurance policy, you can generally draw loans from the accumulated cash value. Unlike a standard loan, there is no need to get bank approval before taking funds from your life insurance policy. Many business owners buy whole life policies partly so they will have a ready source of cash to get them over tough spots.

  You can also surrender the policy for cash. If however, the proceeds are more than the cost of the policy (your investment in terms of total premiums less any refunded premiums, rebates, dividends, or unpaid loans that were not included in your income) you will need to include the excess in your taxable income.

  4.	It Can Serve as Collateral

  A company-owned life insurance policy or a policy that is individually owned can serve as collateral for a loan. You can also use a life insurance policy to secure financing on business equipment. To secure a debt or collateralize a loan with a term policy, you make the lender the beneficiary up to the amount of the debt. The balance of the proceeds would then be paid to your other beneficiaries. When a whole life policy is used as collateral, the lender is protected from default, even if a policy holder doesn't die, by the cash surrender value.

  5.	A Policy Can Protect Your Business Future

  You can spend a lifetime building your business, only to have it swept away by the death of a key employee, whether that key person is you or someone else. If your revenue depends heavily on the work of a star-quality salesman, you should consider having a key-employee policy on him. Real talent takes time to replace, and a key-employee life insurance policy allows businesses some time to find the right person. Again, you can keep the cost low by buying a term policy, or if you buy a whole life policy, it will do double duty as a source of ready cash.

  6.	It Can Be Provided as an Employee Benefit

  Group life insurance is generally inexpensive and companies can make it available to employees as an employer-provided benefit or a voluntary benefit that costs little or nothing. When offered as a voluntary benefit, employees select the level of coverage they want and pay for it themselves through payroll deductions.
  
  For all these reasons, it's a good time to talk with your tax and estate attorney, Ronald J. Cappuccio, J.D., LL.M.(Tax) at (856) 665-2121, who can help determine with your insurance agent, that you have adequate life insurance coverage. In order to leave your loved ones and your business financially secure, they will evaluate your needs, such as funeral costs, outstanding medical expenses, estate settlement fees, ongoing business expenses, credit card debts and mortgages.