Insurance companies offer several different types of products that may be useful in your estate plan. Life insurance is an essential part of estate planning for several reasons. First, it can provide money to pay living expenses for your spouse, partner, and other dependents. Life insurance can also be used to pay final expenses, such as the cost of a funeral, burial or cremation. If you operate a business or own a farm, life insurance can provide liquidity to allow your beneficiaries to retain these assets rather than being forced to sell them due to a lack of funds.
An insurance company can help you identify what type of life insurance policy will meet your estate planning objectives and the amount of coverage you need. One of the most common estate planning mistakes is naming the wrong beneficiaries on life insurance. This happens frequently, especially when policy holders have a living trust, a business or may owe estate taxes. Consult an attorney for guidance on how to name beneficiaries on your life insurance policies.Although most people naturally associate life insurance with estate planning, there are several other insurance products and related products you may want to consider. For example, due to the rising cost of nursing home care, long term care insurance is also an important consideration when developing an estate planning strategy. If you want to leave an inheritance for your children, long term care insurance may pay for nursing home bills that would otherwise reduce the value of your estate.
Annuities are income planning products offered by insurance companies. Certain types of annuities can provide lifetime income for your spouse, partner or another survivor. If you purchase an annuity with a death benefit, you can use the annuity as part of your estate plan to designate one or more beneficiaries to receive the benefit. See annuities and your estate.
Life Insurance Premiums Vary by Policy Type
If you are concerned about whether you can afford to buy life insurance as part of your estate plan, keep in mind that insurance premiums vary substantially depending on the type of policy. For example, if you want to purchase a policy you will own throughout your lifetime that features other benefits, such as accumulating a cash value, the premiums will be much higher than for a more temporary type of policy, such as a term life policy.
See types of policies for more information.Regardless of your budget, there is probably some type of life insurance you can afford. If you need life insurance but are concerned about how to pay for it, look at rates on a term life insurance policy. However, if you have more to spend on life insurance and want to invest in a policy with more long term benefits, look at rates on a whole, universal or variable life insurance policy.Get several quotes before deciding to place your business with a particular insurance company or agent.
How Safe is Your Life Insurance Company?
Over your lifetime, you may invest a substantial amount of money in life insurance policies to provide for your spouse, children, dependents or other beneficiaries. Before purchasing a policy, you should always check the ratings of the insurance company. The ratings can provide valuable insight into the financial stability of the insurer and the security of your investment. Make sure you choose a highly rated company with a long history and track record.Your life insurance company may be rated by the following companies: A.M. Best, Moody's, Standard and Poor's, and Fitch. You can check the ratings of life insurance companies online. If you are not comfortable with how your insurance company is rated, consult a financial planner about whether you should obtain a policy from another company.
Where to Buy Life Insurance
If you need to purchase life insurance or have questions about life insurance coverage, the value of a life insurance policy, naming beneficiaries, etc., contact several local insurance agents with a list of questions. When trying to find a life insurance provider, a good starting point is to look at the insurance companies the large employers in your area use. Large employers typically use top-rated companies to provide life insurance benefits for their employees.Try to determine how much business the insurance company does in your state. If the insurance company you choose does not have many customers in your state, it is more likely they will eventually stop selling policies in your area. Also, if you choose an insurance company that is not a prominent company in your state, you may have less bargaining power with them when trying to negotiate premium rates.This article was updated on May 29, 2017.