Category: Life Insurance

QUESTION

I have a life insurance policy that names my son as beneficiary. Should I also include this policy in my will?

ANSWER

It wouldn’t hurt anything, but no, you don’t. That’s because life insurance beneficiary designations take priority over terms of a will, even if they differ. The same holds true for the beneficiary designations of retirement plans and annuities. This is a good time to remind you that keeping all your beneficiary and contingent beneficiary designations current would be best. If you’re interested in your beneficiaries getting the most from the benefit without triggering estate taxes, or you want to avoid the public glare of probate, you might consider putting the life insurance policy in a trust.

What’s your excuse for not having life insurance? For many younger people, it’s cost. About a third of Gen Z and 39% of millennials think they can’t afford life insurance — with many overestimating that $250,000 of term life insurance for a 30-year-old would cost $1,000 or more a year.*

COST

Securing life insurance in your 20s or 30s can be advantageous and more affordable than you think. For example, a $500,000 term life insurance policy might cost you only $30 a month at 25. At age 45, you could have to pay more than $100.* So, taking care of insurance needs while you are young could save you thousands of dollars over time.

GET REAL

The question becomes, “Can you afford not to have proper coverage? It may sound harsh, but do you want to saddle your spouse, partner, or parent with mortgage payments (even for a limited time), other debts, and funeral expenses at a time when they’re grieving and have other life adjustments to worry about?

Life insurance becomes even more critical if you have or plan to have children. You have their future to consider. Talk with your financial professional soon about your life insurance needs.

_{*Source: LIMRA.com, 2023}

Life insurance is the ultimate safety net for your family. The first step that your personal representative (executor) should take is to file a claim for the benefits.

CHECK ALL POLICIES

With any luck, you’re already aware of the deceased’s life insurance policy and where it’s located. Ideally, it will be stored safely in a metal filing cabinet or fireproof lockbox.

And don’t forget to check for other policies. Travel accident insurance, if applicable, Social Security survivor benefits, or military benefits may be in place and available.

GET COPIES

You’ll need a certified copy of the person’s death certificate to file the insurance claim — and just about everything else you’ll need to do. Usually, there is a small fee for this. Also, request a claim form from the insurance agent or company and complete it.

CHOICES

There may be several options to receive benefits. Most likely, choices will include regular installments or a lump sum, which may be a good option if you need to pay immediate expenses. Generally, life insurance proceeds aren’t taxable.

What if the unthinkable happens? Ensuring loved ones are financially secure when you are no longer here to provide for them means choosing the right life insurance policy.

TERM VS. PERMANENT

Term policies pay out a specific death benefit and remain in effect for a set period. Term life insurance can typically be purchased for a 5- to 30-year term.

On the other hand, permanent life insurance stays in effect over the course of your life—often to age 100. Whole life, variable life, and universal life are all types of permanent insurance.

BENEFIT AMOUNT

Several factors come into play when calculating how much your life insurance policy will cost. Some of these include your age, overall health and life expectancy.

You may not need as much coverage if you’ve already built a sizable nest egg and don’t have much debt. On the other hand, if you have a family you’ll need enough insurance to help provide for them financially for the long term.