Next to estate planning, who wants to think about life insurance? Their own that is?
Answer: No one really.
But that is no excuse.
When you get right down to it, estate planning and life insurance are "fraternal twins" protecting everyone you love and everything you have.
Today we turn our focus on the "financial" twin (life insurance), since the lion's share of my blog posts focus on the "legal" twin (estate planning).
Unfortunately, life insurance itself can be confusing and this can lead to indecision which can lead to procrastination which can lead to ignoring the subject of life insurance all together.
The confusion oftentimes stems from deciding what kind of insurance should you have (term, universal, variable, whole life, first-to-die and second-to-die).
Fortunately, working with an experienced life insurance professional can clear up all of this confusion.
Before you consult with an insurance professional, perhaps you should ponder a question recently posed in a NASDAQ article appropriately titled Why Have Life Insurance?
According to the article, many Americans do not have life insurance.
In fact, the article cited a LIMRA (a research organization for the financial services industry) finding that 83% of consumers do not have any life insurance.
Along with confusion, there seems to be some misinformation in the marketplace.
For example, in the same LIMRA study most Americans surveyed thought a 20-year $250,000 level term life policy for a healthy 30-year-old would cost at least $400 a year.
In reality, however, annual premiums for this type of policy are likely closer to $150.
That is a big swing.
Also, many of those who do have life insurance are paying for insurance that is not appropriate for their unique circumstances, are paying to much for it and do not have enough coverage to protect their loved ones.
So, what are some of the basics you should know as you consider life insurance?
In the end, life insurance comes in two fundamental flavors: term and permanent.
Think of term as "renting" the insurance policy. You build up no equity in the policy itself, but it will pay off if you die. The rent keeps going up with a term policy, too. Not surprisingly, the rent goes up the closer you get age-wise to cashing in on the death benefit.
Permanent insurance is "owned" by you. Part of the premium you pay becomes part of a savings or investment program within the policy itself. Unlike "term," "permanent" policy premiums do not typically increase over your lifetime.
Of course, this is an over simplification of term versus permanent insurance. That is why consulting an experienced life insurance agent can help you get as granular as you wish regarding all of the moving parts that distinguish one from the other.
That noted, term tends to be a good option for young families because they pay a small premium they can afford to cover the economic loss of a breadwinner they cannot afford.
In my own case, I obtained the largest term insurance the underwriters would allow when my family was young. At the same time, I made sure the term policy could be "converted" into a permanent policy without future proof of my insurability.
Over the years Gretchen and I have been converting chunks of that term insurance into permanent.
I personally do not believe anyone outgrows their need for (or benefit from) life insurance.
You see, I attend a lot of client visitations and funerals.
While a widow is grieving a lot of professional folks need to be paid by her, from the funeral home, to the accountant, to the attorney.
Only one person shows up with a check for the widow - the life insurance professional.
Not surprisingly, I have never heard a widowed client complain about the life insurance her husband had.
Talk with your life insurance professional and have an annual review of your coverage.
Reviewing your life insurance policies is one way to make sure you have the coverage that is right for you and your family as you age and your family situation changes.
If you do not have a current relationship with a life insurance professional, then your estate planning attorney can refer you to one.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: NASDAQ (October 9, 2015) Why Have Life Insurance?