The purchase of a life insurance policy will never make most physicians’ top ten list of favorite things to do. After all, there is a lot not to like in the whole process of buying life insurance. With hundreds of products from which to choose, it can be confusing. Insurance contracts can be complex and mind numbing. Insurance agents can be annoying. And, for some people, paying premiums can be irritating. Granted, it’s not a picnic, but when given the opportunity to step back and really look at the advantages of owning life insurance, most physicians will agree that it ranks up there with their very best financial decision.
The Advantages of Owning Life Insurance
It Creates an Instant Estate
Physicians work a lifetime to accumulate the assets that will pay for all of their essential 
needs: a college education for our children, a comfortable home, a pleasurable lifestyle, a secure retirement. Sometimes that lifetime is cut short, but if a family is left behind, those essential needs don’t go away. When a primary breadwinner dies, there are typically additional financial needs that need to be met, such as final medical expenses, funeral costs, legal fees, and outstanding debts. Life insurance creates and instant estate at moment it is needed and it leaves a legacy of love, comfort and certainty.
It has a Triple Tax Break
Physicians dislike taxes as much as most anyone, if not more. So, they should love life insurance. No other financial instrument has the host of tax incentives that life insurance has and you don’t have to wait until after you die to benefit from them although that is when the biggest tax benefit is realized via a tax free death benefit. Additionally, cash value life insurance allows you to accumulate funds without being taxed currently on the earnings. This can be significant for cash value accounts that are left to accumulate for many years. The difference in earnings can amount to thousands of dollars due to tax savings.
Finally, you can enjoy your cash value accumulation while you are living through tax-free withdrawals to the extent that you withdraw just your principal. Withdrawals from cash value life insurance consist of your principal first, and then your earnings which are taxed as ordinary income. Or, you can borrow from your cash value account, and because this would be considered a loan, it is not currently taxable. All tax issues regarding your life insurance policy should be discussed with a tax professional so you understand all of their implications.
It’s a Capital Source
Life insurance can be a tremendous funding vehicle for many of your essential needs while you are alive. The ability to earn competitive rates of return without the encumbrance of taxes gives life insurance some unique advantages as an accumulation vehicle. Life insurance owners have used their cash value accounts to fund home purchases, college expense, and business start-ups. The cash value accumulation inside a life insurance policy can also be a significant source of supplemental retirement income.
It’s Cost Effective
Life events can be very expensive, especially since many of them occur sometime in the future when the cost of money inevitably increases. The cost to settle a large estate can be significant and the cost for a business to buyout surviving family members can break the business. Life insurance is the only method for paying for these very expensive future events using discounted dollars. For, literally, cents on the dollar, a college education can be paid for, a home mortgage paid off, an entire estate passed to heirs, or a business interest acquired.
Summary
It’s easy for physicians to dismiss life insurance as just one more thing on a checklist of financial obligations. But, if you are going to take the time and trouble to put the vital piece of your financial puzzle in place, you may find it very worthwhile to take a moment and consider how the advantages of life insurance can work in your favor. Perhaps the greatest advantage of life insurance is the peace of mind that it provides while you enjoy all that life brings you. That’s hard to quantify in monetary terms, but, for most people it is priceless.