Large Estate Taxes

• An individual who has a large estate may consider buying whole life insurance to cover the estate taxes. Upon death, those passing along a large estate may create a significant tax bill. Businesses that have large assets but a small cash flow may be particularly troublesome. Some examples include retail businesses that own their own building and businesses that hold significant amounts of real estate and equipment. Without an insurance benefit or the cash savings to pay the tax bill, heirs may have to sell the estate or part of it to cover the tax bill.
  
  

Retirement Investing

• High-income individuals may not be able to use certain tax-advantaged retirement plans to save for retirement. For example, married taxpayers filing jointly with an income over $179,000 are ineligible to contribute to a Roth IRA in 2011. Other investment plans have similar restrictions. Buying a whole life insurance policy that contains an investment account may provide wealthy individuals with a tax-advantaged way to save money for retirement. Before buying a whole life insurance plan as an investment, you should discuss the purchase with a tax professional.
  
  

Medical Concerns

• People with medical problems that may get worse or those with a family history of significant medical problems might want to consider buying whole life insurance while they can still qualify. By obtaining a whole life insurance policy while still in good health, a person can make certain there is coverage if a medical need arises. Significant medical problems can lead to significant medical debt. The insurance benefit can cover these debts, keeping the estate from having to pay the debts.
  
  

Other Situations

• Individuals with disabled children, or others they wish to provide for, can use a whole life insurance policy as a way to fund a trust for the care of that person. Also, individuals who expect to die with significant shared debt may choose to buy a whole life insurance policy to pay off the debt. For example, a working couple may both buy insurance policies to pay off a mortgage that one spouse alone could not afford. Another reason for purchasing a whole life insurance policy is to have a way to pay for funeral and burial costs.