Buying life insurance is hardly a daily purchase – you can only do this once or twice in a lifetime. So you do not know all the ins and outs of this important part of protecting your finances.
But you can benefit from the knowledge of those who deal with daily life insurance matters.
Never name a minor child as a life insurance beneficiary
One of the best reasons to buy life insurance is that you are not available for children. Here’s the problem: Minors can’t get life insurance money directly. If you name a child as a beneficiary, “the life insurance company can bind the money up to the age of 18. Then the child doesn’t get it – without any control,” a certified financial planner and president of Fernandez Financial Advisor Delia Fernandez says in Los Alamitos, California.
Fernandez remembers a father who named his young son as the beneficiary of a $ 78,000 life insurance policy. The father died, and many years later the young man received money at the age of 18. He flew $ 57,000 on marijuana and during a trip to Las Vegas with his girlfriend, then had to spend the rest on rehabilitation.
Another young man received $ 75,000 from a life insurance policy when he turned 18 and immediately bought a sports car. Still, he took it to a party, where it was stolen, Fernandez said.
These mistakes can be easily avoided. Parents should form life insurance and final expense leads trusts for children who not only receive money – no matter how old the child is – but also outline acceptable uses. You can believe that certain amounts of money are disputed at certain ages, such as 25, 30 and 35.
While it may cost a few hundred dollars in legal fees to set up a trust for life insurance income, it is a good idea for young adults and is necessary for young children.
»Compare: Our Site Life Insurance Comparison Tool
Do not allow an ex-spouse to use life to complete a divorce settlement
If you have a divorce agreement that provides you with anonymity or child support, it is also a good idea to make sure that it sets life insurance on your ex-spouse. Otherwise, if your former spouse died you would lose that significant income stream.
But using group life insurance from the workplace is not a good option, says Chris Chen, a certified financial planner at Insight Financial Strategists in Waltham, Massachusetts. Term life insurance is quite cheap, probably cheaper than you think. The most important thing is that it does not come on the job.
“These days the chances of changing employment or dropping out of the workforce are quite high,” Chen says. “If you must change jobs, you may not have group life insurance.” Or you will find that you can no longer have insurance due to health issues.
Here are the tips related to divorce from Chen:
- The life insurance buyer can align the term of the policy to anonymity or years of child support. If a divorce agreement provides for 15-year child support, you can purchase a term life policy for 15 years.
- If you do not control your former life insurance but are a beneficiary, your divorce agreement should state that the life insurance policy will hold you as a “party of interest”. In this way you will be notified when the payment is stopped.
- Disability insurance for a former spouse may be more important than life insurance. If your ex cannot work due to a disability, he or she can go to court and seek a reduction in support payments.
Quotes of whole life insurance
Chris Huntley, president of Huntly Wealth and Insurance Services in San Diego, says, “There are really very positive things to say about whole life insurance that insurance agents have.” According to Huntley, personal finance experts generally agree that “you should buy the term and invest the rest.”
Yet sales numbers indicate that permanent life insurance is extremely popular, indicating that life insurance agents are pitching the product in huge quantities. According to Limara, a financial services research group, among American households with life insurance, 50% have only permanent life, 32% have only term insurance, and 18% have both.
If you are considering whole life insurance, Huntley suggests that you get an insurance policy for a longer term, such as a 30-year term, or a policy that covers you at a specific age, such as 65. This way you can see exactly what it costs to insure your life and separate it from the money you are paying for the fee and the cash value portion of the whole life policy. Huh.
“Most people only need life insurance for 20 to 30 years,” Huntley says, “usually to cover mortgages, growing children, or working years.” Talk to a financial expert about it What you can do with savings by purchasing savings life insurance. ”
Make sure you have ‘survival benefits’ in your life insurance policy
“Living benefits” have become a relatively common component of life insurance policies that allow you to access death benefit money while still living under certain circumstances. Being able to tap into your policy makes it sick and in need of money for living expenses or medical care, says Pamela Plick, a certified financial planner in Palm Desert, California. So make sure your policy I have this facility. .
Living benefits are generally considered “riders” or policy additions, and include:
- A quick death benefit rider. This allows you to use your payment if you are diagnosed as terminally ill. Rules vary but may include a life expectancy of 12 months or less, for example. This can be included with your policy or available for a small additional fee.
- A chronic disease rider. This allows you to access your life insurance benefits without a diagnosis of terminal illness. Instead, the ability to use the rider usually depends on your inability to do two or more “activities of daily living” such as eating, bathing, and dressing.
Knife suggests that you understand what life insurance riders have available to you and what you will need to do to claim benefits.
Life insurance to make the policy
You do not have to wait weeks for your life insurance application to be processed before coverage begins. Include a check for first payment with your application, says Marvin Feldman, president and CEO of the nonprofit education group Life Happens, and on that day you will be retroactively binding coverage. An easy way to ensure that your family dies before your policy is processed is to have a financial safety net.
Our site life insurance comparison tool can help you compare the exact amount of coverage and rates.