People buy life insurance so that they have peace of mind that your loved ones will be provided for if you suddenly die. If you pass away unexpectedly, your named beneficiaries will receive your policy’s benefits. Life insurance is one type of estate planning tool that Elder Care Direction believes is important. Here are the things that you should know about life insurance.
How life insurance works
After you purchase your life insurance policy, you will need to pay or monthly or annual premiums on time. If you die while the policy is active, your family or other beneficiaries will receive the policy’s named amount. Your beneficiaries can choose to receive the money as a lump sum or in installments.
Types of life insurance
The two types of life insurance are term life and whole life. Term life insurance provides coverage for a set duration. These may come in 10-, 20-, or 30-year terms. If you pass away during the term of your policy, the money will pass to your beneficiaries. If you do not die, the policy will expire.
Whole life insurance does not expire as long as you continue paying your premiums. It is expensive, but it will last for your lifetime. Whole life policies may let you invest some of the money or to take loans against the balance.
Who should have life insurance?
Anyone who has children, dependents, or who care for disabled adults should have life insurance. You should also have life insurance if you are married.
How much life insurance do you need?
You should figure out how much money your loved ones will need to be comfortable once you are gone and purchase life insurance in that amount. You can review your monthly budget to help you to figure out how much to buy. A licensed insurance agent can help you to figure out the type of insurance and the amount that you should buy. An insurance agent will give you several options and explain the pros and cons of each one.
Choosing an insurance agent
You should check to make certain that your insurance agent has a current and proper license. You should also check his or her experience and credentials.
You can choose who to designate as the beneficiaries of your life insurance policy. Your beneficiaries can be specific people, a charity, or your estate. If your beneficiary dies before you do, you can designate a contingent beneficiary who will receive the money. You should review your beneficiary designations after major life events such as divorces, births, marriages, and deaths to make certain that they reflect your wishes.
Irrevocable life insurance trusts
Irrevocable life insurance trusts are used to avoid estate taxes that might be incurred when your life insurance is paid out. If you set up an ILIT and have the policy benefits paid into it, your beneficiaries will not have to pay taxes on the payouts that they receive. To set up an ILIT, you might want to talk to an experienced estate planning attorney.
You can add insurance riders on top of your basic policy. An accelerated death benefit will provide you with financial help if you are diagnosed with a terminal condition. An accidental death benefit is another rider that gives your beneficiaries up to double the amount of your policy if you are killed in an accident. You will want to check the exclusions for this rider, however.
A family income benefit rider lets you have your benefits paid to your beneficiaries in installments over time. A long-term care rider adds additional coverage for your long-term care needs if you don’t wish to purchase a separate long-term care policy.
Selling your life insurance policy
If your children are grown or you no longer have your spouse, you might consider selling your life insurance policy. There are companies that purchase these policies and that will pay you a lump sum called a life settlement.
Learn more with Elder Care Direction
Purchasing a life insurance policy can help you to ensure that your loved ones will be taken care of after you die. Elder Care Direction can help you to understand how life insurance might benefit you. To learn more, contact us today by filling out our online contact form.