In "3 ways to choose the right life insurance plan," the New York Daily News invites readers to consider how their lives have changed over the decades, and how their insurance should change too.
Young adults have fairly straightforward insurance needs like obtaining insurance for their first car, a ring for that special someone, or their first apartment. As we get older, our needs in life and in insurance change. Saving for a down payment on a first house, college tuition for kids and then retirement, for example. And many of us will be faced with unexpected events, like the illness or death of a loved one, a divorce or a spouse who is forced to retire prematurely.
Make adjustments. Life insurance is an important financial tool that, just like your estate plan, should never be a "set it and forget it" plan. For example, a couple has life insurance policies on which they're continuing to pay premium payments when the husband passes away. Depending on the death benefit and her level of concern for their children's financial state, it is possible that the wife does not need to keep her life insurance policy. She could put the dollars she was paying for insurance premiums in her pocket to put toward other expenses. Also, many companies have employer-sponsored life insurance plans for their employees that can cover between one and three years of salary. Depending on the level of coverage, you might consider purchasing additional insurance outside of your employer.
Know when to cancel. Don't be afraid to cancel your policy if it makes sense for your financial outlook. By the time some people retire, hanging on to insurance policies and continuing to make premium payments may not make sense. If you have a total estate value that may exceed the federal estate tax exemption amount at your death ($5.45 million for 2016), high net worth individuals may use life insurance to help offset estate taxes more than the exemption amount.
Select the correct plan for your stage of life. Consider premium costs when you are making decisions about what kind of coverage you need. Typically, the amount of coverage available to an individual is capped at ten times the annual salary. There are strict guidelines used by insurance companies to determine coverage, based in part on health and financial guidelines. Your medical records will be reviewed and you will likely be asked to undergo a medical exam before your rates are set.
While we at Family Estate Planning Law Group do not sell insurance, we know it can be a powerful estate planning tool for our clients. For more information, explore our website and contact us to schedule your consultation today!
Reference: New York Daily News (March 22, 2016) "3 ways to choose the right life insurance plan"