4 Reasons Why Traders Should Ensure Their Life Insurance Policies Remain Intact

David Banks
Authored by David Banks
Posted Monday, June 24, 2024 - 9:57am

Traders take risks, it comes with the territory. But what steps can you take during your career to ensure that your family’s finances remain safe?

Many people don’t think of life insurance early enough while still alive, but let’s look at all the ways that it can be a valuable asset for traders. It is indeed a tool for especially those who rely solely on their trading income to support their families.

  1. Income Replacement

Trading is unpredictable with times of high volatility or losses. Life insurance is the safety net for your family should you pass away unexpectedly during such a period. The death benefit can replace the lost income, ensuring your family can continue financially secure.

  1. Debt Coverage

If you pass away with outstanding loans used for trading, your life insurance payout will be used to help cover those debts, meaning your family will not be left with that burden. If you have a permanent life insurance policy that builds cash value, you can also borrow money from it to pay off leverage or loans you used to amplify your trading. 

It is important to keep in mind that this is mostly only possible with very specific policies. Term policies won’t allow you to borrow from it as no cash value is associated with it. Make sure to talk to your financial advisor about the best life insurance companies in your region that offer whole-life policies that specifically build up a cash value. Reassured is a good place to start to compare quotes.

  1. Business Continuity

If you are part of a partnership or trading firm, you can structure your life insurance to provide the funds for a buyout of your share of the business in the event of your death. This will allow the business to continue operating without major disruptions. This could also form a part of your initial security needed to form a partnership in the first place. 

  1. Legacy Planning

If it is important to you to leave a lasting legacy after you pass away, you can structure your life insurance policy in terms of the beneficiaries. You can designate charities or other organizations to receive the proceeds from the policy. You can also select family members to manage such trusts, building a lasting legacy for your family.

What is Whole Life Insurance?

It is a life insurance policy that provides you with coverage throughout your entire life span if you are the insured person. The death benefit is tax-free, and it also provides a savings component that builds up a cash value over time. This is the benefit we mentioned earlier in the article under point two: Debt Coverage. Interest on the cash value will accrue on a tax-deferred basis.

What is Universal Life Insurance?

It is another type of permanent life insurance that also has a cash value element to it. Unlike whole life insurance, you have the freedom throughout the policy term to lower or raise your premiums. It is subject to specific limits, however. This element gives you the freedom to adjust your expenses according to your current budgetary restraints or upturns. Keep in mind that if you lower your premiums for too long it will ultimately affect your death benefit.

To That End

Actively contributing to a life insurance policy from a reputable insurer holds multiple benefits for traders. While alive and also when you pass away. It can provide a layer of protection during times when your investments lose money, and it can ensure that your legacy remains intact after your passing. Always ensure that you only work with registered insurers with a good standing reputation.


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