There are certain events and fundamental changes in your life when you really should take a moment and assess whether you need life insurance or should adjust the coverage you already have.
Lewis Brown has helped people in the Dallas-Fort Worth region for nearly two decades to financially plan for their and their family’s futures, including anticipated and unforeseen life-changing events. Changes in your life circumstances, such as marriage, or buying a home, should prompt you to at least consider buying life insurance, and if you already have a policy, perhaps adjusting it.
No one enjoys discussing and planning for the variable outcomes that can occur after an untimely death. However, having the right life insurance that fits your personal circumstances can give your loved ones and even your business partners peace of mind that the right safety nets are in place just in case.
Not yet sure about purchasing life insurance policy? If you died today what will happen to your spouse, family, home, and pets, and your business and business partners? To read the life insurance basics, or call Lewis Brown for a one-on-one meeting to discuss your circumstances and goals, at (972) 755-9000, or book a meeting online.
Life Changes That Will Affect Your Life Insurance Needs
1. Family Events and Changes: Births, Marriages, Divorces, Death of a Child or Spouse, and Supporting Parents:
The plain fact is the above life events and changes can and will transform your family’s financial circumstances enormously. These are all changes when someone becomes financially dependent on or independent of your income, or shares in or dissociates from financial obligations, such as a home mortgage.
At these times you should contact a financial advisor and take a hard look at your life insurance coverage to assess whether you have the right coverage to ensure that your family’s future is safe, and that you are not paying for coverage you do not need, especially if a beneficiary of the policy has passed.
Ask yourself: In the case of my untimely death, will my child be able to afford college, my spouse be able to remain in our home, or my parents be able to afford living out the rest of their days with appropriate healthcare and in safety and comfort? Or have your obligations decreased? Lewis Brown can help you analyze what is best for you and your unique circumstances and goals.
2. Change in financial situation: Buying a Home, Dealing with Debt, Changing Jobs, Changes in Your Spouse’s Employment
The above financial changes can alter your family’s ability to meet your and your family’s financial obligations. If the worst were to happen, could your spouse or your children manage the mortgage payments without you? What about monthly maintenance, utilities, unforeseen repairs, and property taxes?
If you have debt, which many of us do, contact a financial advisor to help you manage your debt and plan for the what-ifs. Without a plan your untimely death would not only be tragedy, it could also leave your family drowning in debt.
If you have a lot of debt, it may make sense to consolidate some or all of your debt if a more favorable rate is available. Then you and your advisor should consider how your family would be able to meet your obligations if something were to happen to you. Life insurance should assist in paying off at least some, if not all, of your debt and may provide a financial cushion to help your loved ones begin a new life without you.
Changes in your and your spouse’s employment can both increase and lessen the amount of coverage you need. If your or your spouse’s income rises, you may want to pay down your debt more quickly, or may wish to improve your lifestyle. In either case you may need different life insurance coverage to reflect that change and your choices. If your spouse loses a job, you may want to increase your coverage, just in case.
3. Retirement: Do You Need Coverage? Do you have the Right Coverage?
A retirement plan is only as good as its ability to meet unforeseen changes. If you are or are about to become retired, life insurance can be the third leg of the stool that ensures that those who depend on your retirement income or who you want to benefit form your estate, need not suffer financially if you die unexpectedly.
If your spouse or family depends on the income generated from your retirement plan, without life insurance coverage it is just an unprotected savings and investment program. With the right life insurance policy you will be able to help pay for your family’s expenses and even your spouse’s retirement.
If you have accumulated a large estate, life insurance can help foot the estate-tax bill, preserving assets for your heirs. Or, if your estate is more modest, life insurance can provide a legacy for your children and grandchildren even if you use up most of your assets during your retirement years.
Lewis Brown has been helping people plan for their retirement for almost two decades. To learn more about retirement planning, or make an appointment with a Lewis Brown associate by calling (972) 755-9000, or book a meeting online.
4. Business: Financing, Key Personnel, and Value Changes
Any time you make big changes in your business plan, it makes sense to make changes to your life insurance coverage. In addition to the change in your business plans, if you are a business owner, solo or in partnership, if you died unexpectedly, what would happen?
Whether expanding or developing, if the success of those changes depends on you, it is a good time to reevaluate your life insurance coverage. If you have partners, this is a discussion that needs to be had, and with the expertise of a financial planner, to ensure everyone has the best chance to succeed in the toughest of possible situations.
Key changes that should prompt this discussion include taking on or paying off debt; a new dependency on a key employee or employees; and a sizable change in your business’ valuation.
Every business is unique, and therefore a life insurance policy should be chosen to meet your business’ particular needs. Lewis Brown works with small and medium-sized business owners to craft appropriate life insurance policies to protect your business, your partners and your employees from the unforeseen possibilities.
No FAQ can answer all of the questions you may have about life insurance. Below are some of the most frequently asked questions we get from our clients. However, please know that everyone’s individual financial and life circumstances are different, and therefore require personalized attention and solutions.
We at Lewis Brown are experts in the field of helping families, individuals, and businesses plan for their futures. We have been providing one-on-one financial management services in the Dallas-Fort Worth region for almost two decades. Give us a call and meet with us to discuss your circumstances and goals, at (972) 755-9000, or book a meeting online.
Our Most Frequently Asked Questions and Answers
What are accelerated death benefits and how do they work?
Many policies contain a provision that allows a terminally ill person to collect a significant portion of his or her policy’s death benefit while still alive. The money can be used to get family finances in order, pay for uncovered medical expenses, or simply do certain things for your family or friends while you still can. It is important to note that the amount taken out while still living is subtracted from the death benefit payments your beneficiaries receive, along with a fee for early payment of benefits.
Medical tests provide accurate, current information about an applicant’s health that enable insurers to charge premiums that reflect the level of risk an applicant represents. Because some health conditions are easily managed through proper medication, therapy or lifestyle changes, medical information makes it possible for insurers to cover applicants with certain health conditions. More serious or incurable conditions present a very significant risk that some insurers may not want to assume.
- Always name a contingent, or secondary, beneficiary just in case you outlive your first beneficiary.
- Select a specific beneficiary rather than having the proceeds of your life insurance paid to your estate. One of the great advantages of life insurance is that it can be paid to your family immediately. If it is payable to your estate, however, it will have to go through probate with the rest of your assets.
- Be very specific in wording beneficiary designations. Saying “wife of the insured” could result in an ex-spouse receiving the proceeds. Naming specific children may exclude those born later. If your child dies before you, do you want the proceeds to go to that child’s children? Changing the beneficiary designation is easy, but you have to remember to do it.
Due to the various issues involved, an agent can be an excellent source of information to help you properly set up your beneficiary designation.
Think twice before you do, because in many situations it may not be to your advantage. Before dropping any in-force policy, consider:
- If your health status has changed over the years, you may no longer be insurable at standard rates.
- Your present policy may have a lower premium rate than is required on a new policy of the same type, if only because you’re older.
- If you replace one cash-value policy with another, the cash value of the new policy may be relatively small for several years and may never be as large as that of the original one.
- You will be subject to a new contestability period, which starts at the beginning of the new policy. Typically, if you die within the first two years of your policy, the insurer may not believe it had all the facts on your health and lifestyle prior to you death, and may claim misrepresentation, and deny the claim.
You should ask an insurance agent for a detailed cost breakdowns of both policies, including premiums, cash-surrender value, and death benefits. Compare these along with the features offered by both policies. If you decide to surrender or reduce the value of the policy you now own and replace it with other insurance, be sure that:
- The agent making the proposal puts it in writing.
- You pass any required medical examination.
- Your new policy is in force before you cancel the old one.
If you miss a premium payment, you typically have up to a 31-day grace period during which you can pay the premium with no interest charged. If you own a term policy and fail to pay your premium within the grace period, your insurance company will typically terminate the policy. If you own a permanent policy and fail to pay your premium within the grace period, your insurance company, with your authorization, can draw from your policy’s cash value to keep the policy in force. In some flexible-premium policies, premiums may be reduced or skipped as long as sufficient cash values remain in the policy. However, this will result in lower cash values and a shortened coverage period.
Whether you should consider adding a rider to a policy you’re considering really depends on your specific needs, objectives, and budget. Here are a few riders that you at least should take a close look at and consider.
A disability waiver of premium rider stipulates that if you become totally disabled for a specified period of time, you don’t have to pay premiums for the duration of the disability. Why might you want to consider such a provision? Disabling illnesses and injuries are much more common than you realize. If you become disabled and your income declines or disappears for a period of time, a disability waiver of premium can ensure that your life insurance policy will remain in force.
An accidental death benefit is another common rider. It will pay an additional benefit in the case of a death resulting from an accident.
Many companies offer accelerated death benefits, also known as living benefits. This type of rider allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Ask your agent for information about these and other policy riders.
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