Planning Your Life Insurance

Hello All,

Why do we buy life insurance? Most of us buy life insurance as a protection for our family and loved ones if something happens and we pass before they are able or capable of living independently. Most of the time it is to fill the financial void when you’re gone. But once you’ve purchased the policy, what then? How do you ensure the death benefit goes to the people who need it most and when they’ll need it most? Always make sure that you register it on a database to prevent lost life insurance.

Buying the life insurance policy is just the first step. You also need to make sure what you leave behind is going to be enough. Go over your insurance needs annually – and especially after a major life event like the birth of a child, divorce, marriage or unemployment. The needs of your family sometimes change and that means you should consider changing your policy coverage to match those needs. Talk to your insurance agent if you think you need more coverage or if you think it might be too much. They will be able to help you choose the right amount for your specific situation and needs. If you have a cash value insurance policy with investments you might also consider approaching a financial advisor, who will be able to guide through reallocating your account.

If you have children you’re going to want to discuss your life insurance with them, as well – at least if they’re of a mature enough age. Usually around 18 is probably best but if you think they can handle the discussion younger is okay too. Don’t dwell too much about how mom and dad aren’t always going to be there. Instead make sure they understand how much money they’ll get when you pass and that it should be a sufficient amount for them to afford a higher education and so on. They’ll also need to know who’s going to be in charge of the finances, be it a trust or other type of account. It’s important for them to know if they’ll have immediate access to it or if there are restrictions such as what the funds can be spent on. Just as important as letting them know all this is to let them know why it’s important to plan ahead like this for the future. And if you have any specific desires for the death benefit (such as a college education) it’s important they know this as well and why you think it’s important. Young children are going to need a guardian appointed for them. In some instances this can be a spouse but that may not always be best for your needs. If your children are that young it’s for the best to discuss all this information with their appointed guardian so they will know and understand your wishes.

If you’re concerned your beneficiaries won’t be able to handle the financial duties and obligations a death benefit entails, you might consider creating a trust for their benefit. A legally appointed person (trustee) is then capable of managing various aspects of the inheritance, such as real estate and life insurance proceeds, for one or more beneficiaries. An attorney will help you set up a trust and guide you through which type of trust is right for you and your heirs. It is an excellent way to make sure your wishes are met and protect and plan for your beneficiaries future.
Until next time,

Michael Hartmann
Tweeter: @FindurPolicy

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