Do you have a need for life insurance? Are you planning life events and keeping life insurance in mind? If not you may be leaving your family in a situation that is not ideal after you pass. Most people buy life insurance to protect a family, in most cases that are a spouse or children that have not reached adulthood. But people’s life insurance needs can change as life changes. And just as with life, life insurance can get just as complicated as real life does. Does that mean you should bury your head in the sand? Of course not, you only need to plan and seek the advice of a professional if you need help.
If you have a life insurance policy, it is a good practice to revisit the policy every five years to make sure it still will accomplish your needs. If not, then it is time to take action and carry out the necessary changes. Just like a will you need to treat your life insurance as a living breathing document that needs attention. Be that in the amount of coverage or the designated beneficiaries. Keep on top of this and that will ensure your loved ones will be properly taken care of when you pass.
Now younger adults and parents who are just starting their families look to term policies for their life insurance needs. While this is not a bad thing, you may consider a permanent policy at a younger age as well for a variety of reasons. Yes the term is much cheaper, and you can get more coverage but that is not always what is most needed at a particular point in time. If you are in your 20’s and just got married a 30-year term policy is perfect to protect your new spouse for what will be for most of your working years. Say you then have children and want to protect them for their college education. Then when they are born you buy a matching 20-year term policy to cover the costs of education. When you are dealing with limited periods, term policies make the most sense for just about everyone.
Now a permanent policy is advantageous when you are nearing retirement. This as the name implies is a permanent policy that will remain in effect until you die or stop paying premiums. Unlike a term policy, these create a cash value that can be used in emergencies as you age. A permanent policy will cost more when you are younger, but these costs will be offset as you age and term policies become more and more expensive to maintain. These premiums are leveled out, so the expense of the policy is spread over your entire life and not a particular term, such as 30 years.
As more and more people enter retirement with some form of debt life insurance is becoming more important than ever for surviving spouses. And married couples live longer than single ones when they enter retirement. And furthermore, there is an even higher chance that one spouse will outlive the other by ten or more years. This means that most people will need some sort of life insurance policy to protect their loved one.
And life insurance can also be used as an estate planning tool. Policies placed in trusts can serve several purposes. One, it is a way to gift the premiums to younger family members and then they will be the beneficiary of the death benefit. This allows wealthier people to lower their estate and provide a death benefit to children or grandchildren tax-free. Also, trusts can be established to help pay estate taxes in the event they are required. Any excess can then be passed to loved one as a death benefit with all of the tax advantages. And life insurance can be useful to provide for an annuity in the event the spouse who was lucky enough to have a pension that passes and it can provide a supplemental annuity payment to make up for the lost pension if there were no survivor benefits.
So once again, it is clear that life insurance plays a significant role in preparing for our loved ones after we pass. And just as in life there is no one clear-cut answer to the questions that arise from the needs of life insurance. Seek out a professional who is trustworthy and make sure you disclose your entire financial situation to see that they can help you in the best possible way. No one can assist you unless they have a clear understanding of the whole situation.
If you have any questions or need further information, please do not hesitate to contact me directly.
