Questions about Life Insurance in Estate Planning?
Read on for more information.
Now that so many people review 
their life insurance coverage while creating their estate plans, its doubly important to choose the type of policy best suited to your current needs.
Fortunately, there are key facts about these various policies that can help you make an informed choice. For example, term life insurance doesnt allow you to build up any equity in your policy that you can borrow against when facing an unexpected financial crisis.
However, single adults and younger couples may first buy term life insurance policies since theyre usually much cheaper than whole life ones. They do this fully aware that theyll soon need to convert them into whole life insurance policies at the most cost-effective time. Of course, when a person lives beyond the age limit covered by his/her term life policy, it will no longer have any financial value and its named beneficiaries will receive nothing.
Here are some additional facts and definitions you should discuss with your Minnesota estate planning lawyer before choosing any specific type of life insurance policy.
Investopedias Useful Policy Definitions
- Whole life insurance. This type of policy provides both insurance and investment values. When the policyholder passes away, the company must pay out a previously stated amount of money to the named beneficiary. Whole life insurance also provides an investment value to the policyholder who can borrow money against his/her equity in the policy, as long as all company restrictions or requirements are observed;
- Variable life insurance. This policy offers the most expensive type of cash-value life insurance available. Some people greatly prefer the broad flexibility offered by a variable life plan that allows you to allocate a portion of yourpremium dollars to a separate account comprised of various types of investment funds . . . [that can include] stocks, bonds and other instruments;
- Term life As indicated above, younger people may view this type of coverage as a kind of starter life insurance policy. Its usually fairly cheap and offers a modest pay-out amount if the holder dies before a set time. Of course, as this person grows older and approaches the cut-off age of the policy (often near 80 or so), it will become more expensive to try and convert the policy to whole life coverage. Therefore, deciding on the best time to convert from your term life insurance policy to whole life is crucial.
Make sure you review your type of insurance coverage at least once a year so that it can provide both you and your beneficiaries with the best possible benefits.
General Facts Everyone Must Bear in Mind When Choosing/Maintaining Life Insurance
- Avoid borrowing too much money against your whole life or permanent life insurance policy. Few things are sadder than hearing a cash-strapped widow or widower describe how little money s/he received after a spouse recently died. Far too often, people wrongfully assume that theyll eventually be able to build their lost equity back up in a policy theyve borrowed against;
- Only choose one of the more complex, investment-oriented life insurance policies if youre willing to carefully monitor its ongoing value. Of course, you can always employ an investment banker or financial advisor to stay on top of this information for you;
- Be sure your spouse also maintains adequate life insurance coverage. When a wife has never (or rarely) worked outside her home during most of her life, couples often forget to obtain an adequate life insurance policy for her as well
Minnesota Estate Planning Attorney
Contact the Flanders Law Firm today. The firm offers free estate planningconsultations to all potential clients. Call (612) 424-0398.
