When Judy purchased her life insurance policy 10 years ago, she thought her insurance planning was complete. She assumed that if she paid her premiums on time, she could sit back and not think about life insurance anymore.
Judy’s life insurance may help to protect her loved ones from future uncertainties, but her policy should not be left to run on autopilot. Life insurance is just like any other piece of your financial puzzle. As your circumstances and needs change, periodic monitoring is needed to help ensure that your life insurance will achieve your desired objectives.
Here are some questions that Judy, like all policyholders, can ask as part of an annual review.
Is My Coverage Up-to-Date?
To start, Judy may want to consider whether her original reasons for purchasing her policy are still applicable. She may also evaluate any additional needs.
For instance, when Judy initially purchased her policy, she was newly married and owned a modest home. Now Judy and her husband, Jim, have four children and a much larger home. Is Judy’s existing policy appropriate for her new circumstances? She may need additional life insurance to help cover a larger mortgage, pay college expenses for four children, and contribute to her family’s financial future in the event of her death.
If Judy’s existing policy is term insurance, she may want to consider converting it to a permanent contract. Permanent insurance contains a cash value component that offers the potential for tax-deferred accumulation, as well as the same death benefit features of term insurance.
In the future, the cash value could be accessed to help supplement retirement income needs. Keep in mind that withdrawals and loans taken against a policy’s cash value could reduce the death benefit, increase the chance that the policy will lapse, and may have tax consequences.
Have My Beneficiaries Changed?
Currently, the primary beneficiary of Judy’s life insurance policy is her husband, Jim. If Jim were to predecease Judy, the policy currently names Judy’s nephew as a contingent beneficiary. However, now that Judy has her own family, she may choose to update her policy’s beneficiary arrangement to name her children as contingent beneficiaries instead of her nephew.
In addition, if Judy and Jim eventually set up a living trust, a legal professional may suggest naming their trust as the policy’s beneficiary.
Has My Estate Grown?
Regardless of the type of life insurance Judy owns and the beneficiary she chooses, the death benefit proceeds from the policy will be included in Judy’s estate.
As their asset base increases, the family may want to periodically monitor and update their estate planning strategies to help minimize the effects of estate taxation.
Life insurance may play a significant role in solidifying the family finances of couples like Judy and Jim. But as with all financial matters, life insurance policies need to be reviewed on a regular basis.
Be sure to consult a qualified professional to help you evaluate your present situation and determine an appropriate course of action.
With help from our financial advisor, Dallas Lee Whittaker, you can manage your finances and achieve your goals.
Dallas Lee Whittaker CFP®, CMFC®, CLU®
Senior Vice President
Dallas has over 20 years of experience in all areas of wealth management and financial services. He is passionate about adding value to the lives of his clients through education and addressing their financial goals in a collaborative manner. With a deep knowledge of insurance which is an added benefit when doing financial planning, Dallas is an asset to our clients and the Marine Bank Wealth Management team.
Dallas is a Certified Financial Planner™ and currently holds a Chartered Mutual Fund Counselor (CMFC) designation awarded through the College for Financial Planning and a Chartered Life Underwriter (CLU) designation through the American College. As Senior Vice President of the Marine Bank Wealth Management Department, Dallas focuses on comprehensive financial planning to help individuals and businesses achieve peace of mind in their financial lives with an emphasis on retirement strategies, legacy planning, and generational wealth management.
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