Insurance should play a critical role in the risk management of your life and financial portfolio. Different kinds of insurance help protect you and your loved ones in different ways against the cost of accidents, illness, disability, and death and insurance can also provide leverage for wealth accumulation, wealth preservation, wealth transfer planning and access to liquidity.

A permanent life insurance policy offers insurance coverage coupled with a cash value component that allows you to accumulate money — tax free. If the policy is held long term, the cash buildup may provide returns potentially exceeding some bonds and other vehicles such as money market accounts. In addition, the owner may be able to withdraw or borrow against the cash value portion of the policy on a tax-free basis to achieve a variety of goals, such as supplementing retirement income.

Some newer hybrid life insurance/long-term care insurance policies can help you manage the cost of assisted living or nursing home care later in life.

Unanticipated taxes can quickly diminish savings or investments, so you may want to consider life insurance as a means to protect some assets from taxes upon your death. For example, life insurance death benefits are generally excluded from income tax to the beneficiary and may be excluded from the taxable estate if the insurance is owned by an Irrevocable Life Insurance Trust (ILIT) from inception.