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Life Insurance: Key to Financial Planning

Posted on May 19, 2020 by

Margaret Amsden

Margaret Amsden

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The fact that life insurance pays money to cover your bills and burial after you die is not a secret. Aside from that, there are many other reasons to have life insurance, but most people are woefully unaware of the benefits of doing so and the process of obtaining it in the first place. Keep reading for a few facts about life insurance that everyone should know.

Employee-Sponsored Insurance Is Not Enough

Most companies offer life insurance to their employees. Typically, this is equal to about one and a half times your annual salary, not including bonuses or commission; you might even have the option to purchase additional coverage. However, chances are, it is nowhere near enough, particularly if your family is still young. Most experts recommend at least five to seven times your annual income in life insurance. Further, if you change employers, your company gets bought out, or you are let go, you might lose your coverage.

Your Life Insurance Beneficiary Can’t Make Decisions for You

Some people mistakenly believe that the person they name on their life insurance policy automatically has say-so over the rest of their finances when they die. This is not true, and the beneficiary is only entitled to life insurance proceeds; there are other steps you need to take before your assets are secured. For example, you’ll need a living will or power of attorney if you’re seriously impaired prior to your death. Further, if you die without a will, only the assets that you hold jointly with someone else can pass to them without going through probate. Make sure to have your documents organized to prevent issues for your family if you die suddenly.

Many Insurance Companies Require a Blood Test

Having to take a blood test might feel like an invasion of privacy. However, it is an important step because it helps your underwriter determine the risk they take by insuring you. The process isn’t as scary as it sounds, and it’s not a day-long event that will disrupt your schedule. In most cases, an examiner can come to you, possibly even on your lunch break. The purpose of the blood test is to check for drug and nicotine use as well as for health conditions like diabetes, high cholesterol, and high blood pressure. While you can be denied coverage for these and other conditions, if your blood test comes back with positive results, you may actually wind up with a lower rate than you anticipate.

Term Life Isn’t for Everyone

Term life insurance is an affordable option for people of all ages. But there are instances when a more expensive whole life policy makes sense. One of these is when you have a special needs child. If you buy your whole life policy early enough, your rate will not change, and your beneficiary – your child or their caretaker – are guaranteed the policy payout. With term life insurance, your rate changes at the end of the term, and you may not be able to afford the new monthly fee. Keep in mind, however, that permanent life insurance shouldn’t be viewed as an investment due to the low return rate.

You are Probably Not Too Old!

Let’s say that you’ve made it to your retirement years without owning a life insurance policy. You might think it’s too late to look into it now. Thankfully, that is probably not true, and some insurers cater to an older crowd, all the way up to age 85. These policies will not be issued with the intention of replacing an income, but to ease the burden on your family when it’s time to pay for your funeral. If you are over 65, you’ll likely qualify for a policy of $25,000 or less.

Life insurance is an asset. It is a product that makes sense for everyone, but it is misunderstood by most. So, get to know the benefits of ensuring what will hopefully be a long, long life.

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Margaret Amsden

Shareholder, Private Client Services

Margaret leads the firm’s private client services group as the point person for individual, estate and succession planning tax strategies.

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