Planning Ahead: The Role of Life Insurance in Estate Planning
Although many people view life insurance primarily as a way to replace income for dependents, it can also play a major role in estate planning. Strategic use of life insurance policies can provide lasting financial security, reduce estate taxes, and facilitate wealth transfer with minimal tax burdens.
Protecting Your Loved Ones
The death benefit from a life insurance policy can provide financial protection for your loved ones when you pass away. It can help replace lost income, cover living expenses, and pay off debts. Life insurance proceeds are generally not subject to income tax, so your beneficiaries will receive the full amount. This immediate influx of cash can be crucial for families, particularly if the primary breadwinner is no longer there to provide support and when an estate has a waiting period while going through probate.
Avoiding Probate
One main advantage of life insurance is that it bypasses the probate process. The funds are paid directly to the beneficiaries designated in the policy upon proof of death. This allows them to access the money essential for covering immediate expenses, such as mortgage payments and other monthly bills, as well as funeral costs.
Unlike estate assets, which may be tied up in probate for months or longer, life insurance proceeds are generally disbursed within weeks. This makes it a valuable estate planning tool for those seeking to reduce delays and complications for their loved ones.
Minimizing Estate Taxes
Federal estate tax can be a major concern for individuals with substantial estates. The filing threshold for 2025 is $13,990,000, as stated by the IRS. When structured properly, life insurance can help reduce or eliminate estate tax liability.
One effective strategy is to establish an Irrevocable Life Insurance Trust (ILIT). By transferring ownership of your life insurance policy to the trust, you remove the death benefit from your taxable estate, which could significantly reduce estate tax obligations. An ILIT allows you to specify how the death benefit is distributed, ensuring it goes to your intended beneficiaries.
Equalizing Inheritances
Life insurance can be an effective tool for equalizing inheritances among heirs. For example, if one child is to inherit a family business or property, a life insurance policy can provide equivalent value to other children. This strategy can help ward off family disputes and ensure each beneficiary receives a fair share of the estate’s value.
Funding Buy-Sell Agreements
For business owners, life insurance can be a critical component of a buy-sell agreement designed to allow the remaining partners to buy out the deceased partner’s share. The death benefit provides the liquidity needed to fund the buyout. These agreements can help ensure business continuity without selling off assets or facing severe business disruptions.
Charitable Giving
Charitable giving is another strategic use for life insurance in estate planning. By naming a charity as the beneficiary of a life insurance policy, you can leave a legacy that reflects your values and commitment to an organization such as your church or charity. Depending on the structure of the policy, the strategy can provide your estate with certain tax benefits.
Final Thoughts
Life insurance is more than a financial safety net. It is a versatile estate planning tool that can help you protect your family, minimize tax liability, and facilitate smooth asset distribution. Speak with our experienced agents at Brad Smith Agency about integrating life insurance into your estate plan. Call us today at (765) 791-1255.
How Life Insurance Policy Payouts Work
Life insurance is a critical safety net for your loved ones, designed to provide financial support should you suddenly pass away. But how do life insurance payouts work? Understanding the process can help you feel confident that your family is protected.
What Is a Life Insurance Payout?
A life insurance payout, often called a death benefit, is the money paid to your beneficiaries when you pass away. This payment is typically tax-free and is intended to help cover expenses like funeral costs, outstanding debts, and ongoing living expenses.
What is the Claim Process for Life Insurance?
When a policyholder passes away, the claims process generally follows these steps:
- Notification: The beneficiary contacts the insurance company to report the death. It’s important to have the policy details and the death certificate handy.
- Documentation: The insurer will request a claim form and the certified death certificate. Some companies may also require additional information to verify the claim.
- Review: An insurance representative reviews the claim and verifies the policy details. This step ensures that all conditions of the policy have been met.
- Payout: Once the claim is approved, the insurer processes the payout. Depending on the insurer’s procedures, the payout can be made as a lump sum or, in some cases, as structured payments over time.
Each insurer can have a slightly different way of processing your claim. If you have questions about how your current policy works, our experienced life insurance agents can help you understand your insurer’s unique approach and if it meets your needs.
What Factors Influence My Life Insurance Payout?
Several factors can affect how your life insurance payout is processed, including the following:
- Policy terms: The specific language in your policy determines the payout conditions. For example, accidental death benefits or riders can add additional value.
- Beneficiary designation: Ensuring that your beneficiaries are correctly designated is critical. Any errors in naming or contacting beneficiaries could delay a payout.
- Exclusions and waiting periods: Some policies include exclusions (such as death due to suicide within a specific time frame) that can affect the payout. It’s important to understand these conditions when purchasing a policy.
Understanding Your Unique Claims Process: Why It Matters
Having a clear understanding of how life insurance payouts work can give you peace of mind. You’ll know your loved ones will have financial support during difficult times, allowing them to focus on healing and rebuilding without added money-related stress.
Plan for the Future with a Dependable Life Insurance Payout
Choosing a life insurance policy is more than just an investment—it’s a commitment to protecting your family. As you explore your options, consider how the claims process and payout methods align with your financial goals.
If you’re ready to secure your future with reliable life insurance, our experienced life insurance agents are standing by to guide you through the process. Contact us today for personalized advice and find the best coverage to suit your needs.
What Happens If You Outlive Your Term Life Insurance Policy?
Term life insurance provides coverage for a specific period, typically 10, 20, or 30 years, ensuring financial support for your loved ones should you suddenly pass away or become incapacitated. But what if you outlive your term policy? Understanding your options can help you plan for the future and ensure continued financial security for your loved ones.
What is Term Life Insurance?
Term life insurance offers a death benefit for a predetermined period. It is generally more affordable than permanent life insurance, as your premiums do not build an account. The policy is in effect only for the term of the policy, and the coverage ends without any cash value.
What Happens When My Term Life Insurance Expires?
If you outlive your term life policy, you simply reach the end of the contract. At that point, several scenarios may unfold:
- No payout: Unlike permanent life policies, term insurance does not return any premiums or offer a cash value component. Once the term expires, it is simply over.
- Reassessment of needs: With your term policy ending, it’s a good time to reassess your financial situation, health, and the needs of your family. This can help you decide how to arrange a new policy or buy additional coverage.
If My Term Life Insurance Expires, What Are My Options?
Renewing Your Term Policy
Some insurers offer the option to renew your term life insurance policy when it expires. This can provide continued coverage without a new medical exam. Renewal rates are typically higher due to factors like age and changes in your health status, so comparing costs and benefits is important.
Converting to a Permanent Policy
Many term policies include a conversion feature that allows you to convert a term policy to a permanent life insurance (whole life insurance) policy without undergoing a medical exam. This can be a valuable way to secure lifelong coverage. The premiums for permanent policies cost more but turn into a valuable asset over time. Checking your policy’s conversion options before it expires can help you plan for the future. When buying a term policy, it is best to ensure the insurance company offers a conversion option.
Purchasing a New Policy
If renewing or converting isn’t the right fit, you can explore purchasing a new life insurance policy. Your age and health at the time of application will influence the cost of premiums. Comparing policies from multiple insurers can help you to find the best coverage for your needs. Our life insurance agents can help you get a good understanding of the best options to suit your family and your budget.
Reviewing Your Financial Strategy
If your term policy expires, it may be a good time to evaluate your overall financial plan. Consider how life insurance can protect your loved ones from facing challenges should you suddenly pass away. A life insurance professional can help you determine the best strategy based on your current situation. A yearly review of your policies can help you plan.
Plan Now to Prepare for Tomorrow
Knowing what happens if you outlive your term life insurance policy is essential to your financial planning. It encourages you to:
- Regularly review your insurance needs and adjust your coverage as life circumstances change.
- Factor in potential increases in premiums if you decide to renew or convert your policy.
- Explore alternatives to ensure your approach aligns with your overall goals and budget.
Take Action To Secure Your Future Now
Term life insurance provides affordable protection during a set period. If yours is ending soon, now you know that continued financial security and peace of mind require planning. If you’re considering your options, our knowledgeable life insurance agents are ready to guide you through the process and help you make an informed decision. Feel free to reach out for personalized advice today.
Risk Factors That Impact Life Insurance Premiums
When you purchase life insurance, you agree to pay monthly premiums and hope the death benefit is enough to protect your family should something unexpected happen. If you have ever felt that your premium is higher than expected, you are not alone. Understanding the factors that determine how much you will pay each month. Insurance companies use the following risk factors to calculate your premiums:
Age
Age is one of the most significant factors in determining life insurance costs. The older you are when you purchase a policy, the higher your premium tends to be. Life insurance companies are in the business of managing risk. Older people are more likely to face health issues, which makes it a higher risk situation for the insurer. In your 30s or 40s, premiums are relatively low. If you are pushing 50 or beyond, you should speak with your agent about locking in a plan.
Health
Your health status plays a significant role in your premium. Insurance companies look at medical exams, lab results, and your health history, including chronic conditions such as high cholesterol, high blood pressure, or diabetes. They also take into account factors such as smoking, your weight, and your exercise routine. If you are frequently ill or have a family history of certain conditions, your life insurance premiums could skyrocket.
Lifestyle Choices
If you are a thrill seeker, it can affect your premiums. Insurance companies consider adventurous hobbies such as skydiving, rock climbing, or motorcycle riding high-risk, which can translate into higher premiums. On the other hand, if you prefer to spend the weekend watching Netflix, your premiums may not be affected immediately. Still, your lifestyle could lead to health issues that could impact your premiums over time.
Occupation
What you do for a living can impact the cost of life insurance. High-risk jobs are considered risky for insurers. These include construction work, mining, and work around hazardous materials. The more dangerous your occupation, the higher your premium will likely be. Costs may be lower for individuals with desk jobs. Your line of work reflects your daily potential risks, and life insurance premiums are adjusted accordingly.
Family History
Your family history is an unseen factor in life insurance premiums. If your parents or other close relatives have had serious health conditions, such as heart disease, stroke, or cancer, insurance companies may see you as a higher risk, even if you are currently healthy. This is because genetic predisposition can predict future health problems in some cases. While it is not always a deal-breaker, insurers will consider family health history when determining your premium.
How to Get the Best Deal on Life Insurance
Understanding how different risk factors impact life insurance premiums can help you obtain the right coverage for your needs. While you cannot control everything, such as your age or family history, you can have some influence over other factors, such as your health, lifestyle choices, and occupation. By taking a proactive approach to managing these factors, you can work to keep your premiums as low as possible while ensuring your loved ones are protected. Please speak with our knowledgeable agent. We can help you find your life insurance at the best available rates.
A Guide to Life Insurance with Living Benefits
Most people think of life insurance as a safety net for their loved ones after they have gone. In fact, it can help during the policyholder’s lifetime. Life insurance with living benefits is a policy that goes beyond traditional coverage by offering access to funds in case of injury or illness. This life insurance with a twist may be the financial game changer you were unaware you needed.
What Are “Living Benefits” in a Life Insurance Policy?
Living benefits are an optional feature or rider attached to a life insurance policy that allows you to tap into the death benefit before passing away. These benefits, designed to help you financially while still alive, can be a lifeline in a severe health crisis. Generally, living benefits can apply in any of the following key situations:
- Chronic illness: Living benefits can provide financial support if you are diagnosed with a chronic illness that limits your ability to perform everyday activities. The type of illness could be anything from a serious heart condition to a debilitating neurological disorder.
- Critical illness: Cancer, stroke, heart attack, and many life-altering conditions fall into this category. If you are diagnosed with a critical illness, a life insurance policy with living benefits can help you pay for treatment and rehabilitation and help replace lost income. At the same time, you get back on your feet.
- Terminal illness: If you are diagnosed with a terminal illness and given a prognosis of a limited time to live, living benefits allow you to access the death benefit early. This can help ease the financial burden of medical bills, palliative care, and fulfilling last wishes.
Why Consider Living Benefits?
Healthcare costs are rising, and life can be unpredictable. Serious illnesses, injuries, and long-term medical conditions can drain your finances as well as your health. While traditional insurance may cover medical treatments, it often does not cover the non-medical costs of living with a serious illness, such as personal care services, home modifications, and lost income due to time away from work. This is when living benefits can make a difference. They can provide financial peace of mind with flexibility and support when the unexpected happens and help you manage a crisis without worrying about how to pay for it.
How Are Living Benefits Paid Out?
When a policyholder qualifies based on the terms of the policy, after a request and approval process, the insurer may distribute living benefits in any of the following ways:
- Lump sum payment: In many cases, the policyholder may access living benefits in a lump sum. This is particularly true in terminal illness cases when the policyholder may need immediate financial support.
- Installments: Depending on the policy and the severity of the illness, the payout may be structured in regular installments in some cases. This may be more common for chronic conditions that require long-term financial assistance.
- Policy loan or accelerated death benefit: Some policies offer the option of taking a loan against the death benefit (that must be repaid with interest) or accelerating a portion of the death benefit, thereby reducing the total amount available to beneficiaries after the policyholder’s death.
If you are considering life insurance with living benefits, our friendly agent can help you find a policy that suits your needs at the best available rates.
Options to Consider When Your Term Life Insurance Expires
Life insurance provides invaluable protection for your loved ones, but what happens when your term life insurance policy reaches the end of its coverage period? If you’re approaching expiration, you still have options to maintain financial security for your family. Understanding these choices can help you make the best decision for your circumstances.
Renew Your Existing Term Policy
Many insurance providers allow policyholders to renew their term policies without requiring a new medical exam. However, premiums are likely to increase significantly due to your increased age and potential changes in your health. While this option offers convenience, comparing costs with other alternatives before committing is essential.
Purchase a New Term Policy
If you’re still in good health, shopping for a new term life insurance policy can be a cost-effective way to maintain coverage. A new policy allows you to adjust the coverage amount and term length based on your financial needs. While premiums will be higher than when you initially purchased a policy, they may still be more affordable than other options.
Convert Your Term Policy to a Permanent Policy
Some term life policies offer a conversion option, allowing you to switch to a permanent life insurance policy without undergoing a medical exam. This ensures continued coverage, no matter what your health status. However, conversion options typically have strict deadlines and may only be available for a limited time before your policy expires. Fast action can help you avoid missing this opportunity if this is an option.
Invest in a Permanent Life Insurance Policy
Unlike term life insurance, permanent life insurance provides lifelong coverage and may build cash value over time. While these policies have higher premiums, they can offer financial stability for final expenses, estate planning, or long-term care needs. If maintaining coverage indefinitely is important to you, this option may be worth considering.
Consider a Long-Term Care or End-of-Life Policy
You should explore specialized insurance products if you are in a position where your primary concern is covering healthcare or end-of-life expenses. Some policies will allow you to use a portion of the death benefit for long-term care while you’re still alive, helping to manage potential medical costs.
Choose an Annual Renewable Term Policy
An annual renewable-term policy provides coverage year-by-year, allowing you to extend your life insurance for short-term needs. While this option can provide flexibility, premiums tend to increase annually, making it a less predictable solution in the long run.
Layer Multiple Policies for Comprehensive Coverage
Combining different life insurance policies may offer a balanced solution if your financial needs have evolved. For example, you could purchase a smaller whole life policy for lifelong coverage while supplementing it with a term policy to cover specific financial obligations in a particular period, such as a mortgage or college tuition.
Find the Right Coverage for Your Future
Letting your life insurance policy expire without securing new coverage can leave your loved ones financially vulnerable. Whether you need a new term policy, permanent coverage, or a layered approach, making an informed decision now can provide peace of mind for the future. Navigating life insurance options can be complex, but you don’t have to do it alone. Contact our experienced life insurance agents today to discuss your needs and find the best solution for you and your family.
The Hidden Costs of Skipping Insurance
This April is the 22nd anniversary of Financial Literacy Month, a time that inspires us to secure our future with sound financial planning, budgeting, saving, and investing. It’s an excellent opportunity to improve your financial education and be more secure in your goals. For example, many people are unaware of the hidden costs of skipping insurance, making them financially vulnerable.
Why Consider the Cost of Insurance in My Financial Planning?
Insurance delivers financial security by providing support during significant loss or danger. The apparent “cost savings” you may think you achieve by going without is often sadly misguided. Without proper insurance, one runs a high risk of financial setbacks.
- High medical bills: Without health insurance, you’re responsible for the full cost of medical treatments, including emergencies, hospital stays, and prescriptions.
- Legal fees: If you’re involved in a car accident or lawsuit and lack proper coverage, you could face significant legal fees.
- Property damage: Without homeowners’ or renter’s insurance, you could pay for repairs or replacements after damage from weather disasters, theft, or accidents you have no way of predicting.
- Loss of income: In the event of an injury or illness, not having disability insurance could leave you without a source of income while you recover.
- Financial burden on family: Without life insurance, your family may struggle with expenses, including debt repayment, funeral costs, and day-to-day living expenses after your death.
- Penalties and fines: Some types of insurance are actually considered mandatory, like health insurance. They can carry penalties for non-compliance with state or federal regulations.
Encouraging Long-Term Financial Stability: Types of Insurance
Getting familiar with the different types of insurance is a good idea. These policies can help you in your time of financial need to ensure long-term economic stability.
Personal Insurance
Health insurance is vital for managing healthcare costs and ensuring access to necessary medical treatments. With the rising cost of medical care, health insurance helps cover doctor visits, hospital stays, prescriptions, and preventive care expenses. It also protects you from high medical bills, ensuring you receive the care you need without devastating financial strain.
Life Insurance
Life insurance offers financial protection for your loved ones in the event of your death. It ensures your family can maintain their lifestyle and cover essential expenses, such as mortgage payments, education, and daily living expenses, even after you’re gone. Life insurance can also help with funeral expenses, reducing the burden on those you leave behind. With various policy options available, life insurance is essential for safeguarding your family’s financial well-being.
Car Insurance: A Legal and Financial Necessity
Car insurance isn’t just a requirement in most states—it’s also a safeguard against costly accidents. Without it, you could be held personally responsible for damages, medical bills, and legal fees. Even if you’re a safe driver, unexpected events like theft or severe weather can leave you with repair costs that far outweigh the price of a monthly premium.
Homeowners and Renters Insurance: Protecting Your Property
A home is one of the biggest financial investments you’ll ever make. Homeowners insurance protects you from disasters like fires, floods, and theft, preventing financial devastation and even homelessness.
If you’re a college student or your child is heading to university for the first time this year, moving into an apartment or dorm carries risks that can be covered by renters insurance. The landlord’s policy does not cover the cost of replacing your personal belongings should they be lost due to theft, fire, or other disaster.
Pet Insurance: Avoiding Unexpected Vet Bills
Owning a pet comes with both love and responsibility. Veterinary care can be expensive, with emergency procedures costing thousands of dollars. A sudden illness or accident could force you to choose between financial hardship and your pet’s well-being without pet insurance. A monthly premium can help cover unexpected medical expenses, giving you peace of mind.
Travel Insurance: Essential for Summer Getaways
Planning a summer vacation in the next few months? Travel insurance can protect you from trip cancellations, lost baggage, and medical emergencies abroad. Without it, a sudden illness, flight cancellation, or lost passport could turn a dream trip into a financial disaster. Travel insurance costs are minimal compared to the potential losses you might face.
Insurance: A Smart Financial Decision
Going without insurance brings financial risks that far outweigh the savings. As we’ve covered today, insurance brings:
- Financial predictability – Helps protect against unexpected costs.
- Peace of mind – Ensures you’re covered in case of emergencies.
- Long-term stability – Prevents significant out-of-pocket expenses that could derail your financial goals.
This Financial Literacy Month, take the time to review your personal insurance policies and ensure you’re adequately covered. A little planning now can save you from major financial setbacks later.
If you want to enroll in new or expanded insurance coverage, contact one of our experienced personal insurance agents for a free consultation today.
Why Would I Need Life Insurance for My Child?
There’s a lot to think about when your family is growing. Whether you’ve recently welcomed a child through birth, adoption, or marriage, the future may feel full of unknowns. You do everything you can to keep your child safe—installing car seats, covering electrical outlets, and using baby gates—but have you considered how life insurance could be another way to protect them?
While it’s not something many parents think about, life insurance offers more than just financial protection in the event of the unthinkable. It can also give your child future security and financial opportunities as they grow.
What Are the Benefits of Juvenile Life Insurance?
There are three primary reasons parents choose to purchase life insurance for their children: guaranteed coverage regardless of future health, the ability to lock in lower premiums, and access to cash value that can be used later in life.
Guaranteed Coverage for the Future
Health can be unpredictable. A childhood illness, medical condition, or disability could make it difficult—or even impossible—for your child to qualify for life insurance as an adult. By purchasing a policy now, you can ensure they can maintain coverage for years.
Many juvenile life insurance policies include a guaranteed insurability option (GIO) or a guaranteed purchase option (GPO). These riders allow your child to increase their coverage at specific times in the future, regardless of any changes in health.
Locking in Lower Premiums
Life insurance rates are at their lowest when the insured is young. By securing a policy now, you can take advantage of lower premiums and lock in an affordable rate for the duration of the contract. You may want to consider purchasing a policy:
- At birth – This is when premiums are typically at their lowest.
- Before age 18 – Securing coverage before adulthood can provide long-term financial protection, even if your child develops a health condition later.
Cash Value for Future Opportunities
Permanent life insurance policies accumulate cash value over time. This savings component can help cover major expenses, such as a down payment on a first home, college tuition, or even retirement savings. The flexibility of this benefit makes life insurance a potential financial tool for your child’s future.
Choosing the Right Type of Life Insurance for Your Child
Different types of permanent life insurance can provide long-term benefits. The right choice depends on your family’s financial goals and needs.
- Whole Life Insurance: This policy provides lifelong coverage with guaranteed cash value growth, regardless of market conditions. Premiums remain fixed, making it a stable option for long-term planning.
- Universal Life Insurance: Offering more flexibility, this type of policy allows for adjustable premiums and coverage amounts. It also builds cash value, which can be borrowed against for future needs.
- Variable Universal Life Insurance: This policy includes investment options, allowing more significant cash value growth. However, it also carries more risk due to market fluctuations.
Is Life Insurance for Your Child the Right Choice?
Every family’s situation is unique and deciding whether to purchase life insurance for your child is personal. While it may not be necessary for everyone, it can be a valuable tool for financial security, providing long-term economic benefits. If you’re considering a policy for your child, an experienced professional juvenile life insurance agent can help you explore options and determine the best plan for your family’s needs. Give our office a call to schedule a free consultation today.
What Women Should Know About Life Insurance
According to a recent study, not only is there a gender wage gap, but also a gender gap in life insurance coverage. Significantly fewer women than men have life insurance policies. Life insurance is a critical tool for financial planning and protecting your loved ones. Women are a vital part of the economy and are crucial to their families’ economic security. Nevertheless, many women overlook the importance of life insurance or delay purchasing it.
Why Do Fewer Women than Men Have Life Insurance Policies?
One reason women are underinsured with life insurance is the historical wage gap and income disparity between women and men. Traditional societal views may be another factor, as women have been seen as caregivers first and earners second. Inadequate resources targeting women and insufficient education on financial topics may also contribute to the discrepancy. Finally, misconceptions about access and affordability may lead many women to assume that life insurance will not fit their budgets.
What Do Women Need to Know About Life Insurance Today?
Life insurance can be a cornerstone for financial planning. This is what women need to know:
- Life insurance is not only for breadwinners. It is a common misconception that life insurance is only needed for primary income earners. Women often provide contributions that go beyond a paycheck. The work of stay-at-home parents represents significant economic value. The costs of replacing services such as childcare and household management could significantly burden the family.
- The sooner you buy life insurance, the better it is for you. Age and health are significant factors in determining life insurance premiums. Generally, the younger and healthier you are, the lower your rates will be. Buying life insurance in your 20s or 30s can lock in affordable premiums for many years or a lifetime.
- Life insurance policies are tailored to match your situation: The two main types are term life insurance and permanent life insurance. Term life is generally more affordable. It provides coverage for a specific period, such as 10, 20, or 30 years. Permanent life insurance includes whole life and universal policies. Although more expensive, it provides lifelong coverage and builds cash value, making it a valuable tool for wealth-building or estate planning.
- Plan for the future when considering coverage. In evaluating your life insurance needs, consider current and future obligations. Your financial responsibilities are likely to grow when you start a family or build a business.
- The coverage provided by your employer may not be enough. Many employers offer life insurance as part of their group benefits package. Although this is a good place to start, it may not be sufficient. Most employer-provided life insurance policies offer limited coverage, which may fall short of providing for your family’s long-term needs. Furthermore, it is usually not portable, so you could lose it if you change jobs.
Securing life insurance is about protecting your assets, ensuring your family’s financial stability, and gaining peace of mind knowing you are prepared for the unexpected. Meet with our experienced agent for friendly and knowledgeable assistance in purchasing a life insurance policy that suits your budget and needs.
The Newlyweds’ Guide to Life Insurance
Marriage is about building a life together. Life insurance is a safety net that helps protect what you are creating. Although it may not be the first thing on your mind after the honeymoon, creating a strong financial plan should be high on your to-do list. Your financial strategy should include planning for risk and buying life insurance.
Why Should Newlyweds Consider Life Insurance?
After marriage, your financial lives are intertwined. If you are supporting each other’s career goals, sharing a mortgage, or planning to start a family, life insurance can be a cornerstone of financial security for the following reasons:
- Income protection: If one partner dies unexpectedly, the other could be left shouldering financial burdens alone. Life insurance can allow the surviving spouse to maintain their standard of living without added stress.
- Debt coverage: Shared debts, such as mortgages, car loans, and student loans (if you live in a community property state and the debt was incurred after the marriage), do not disappear if a spouse passes away. Death benefits from a life insurance policy can cover these obligations, so the surviving spouse is not left in financial distress.
- Family planning: If you plan to have a family, life insurance can provide financial support for your spouse and future children, funding everything from daycare to college tuition.
- Lower premiums: If you buy life insurance when you are young and healthy, you can lock in lower premiums, making the policy more affordable in the long run.
How Much Life Insurance Do Newlyweds Need?
Not everyone needs the same amount of life insurance. A general rule of thumb is to aim for coverage at seven to 10 times your annual income. However, as specific needs can vary, newlywed couples should consider their unique situations to determine the right amounts of coverage for them. Key questions to ask include:
- What are your current financial obligations? Add up the total of your car loans, mortgage, and any other shared debts.
- How much income would your spouse need to maintain their current lifestyle? Consider monthly expenses and how long your partner will need financial support.
- Are you planning for future expenses? Factor in the costs of raising a family, saving for your retirement, and your financial goals and dreams for the years ahead
What Types of Life Insurance Are Best for Newlyweds?
After you have an idea of how much coverage you need, the next decision is what type of life insurance is right for you. The choice usually comes down to either of the following two types of policies:
- Term life insurance: This is straightforward and affordable coverage for a specified period, such as 10, 20, or 30 years. It is a practical choice if you need substantial coverage, but your budget is tight.
- Whole life insurance: This type of policy provides lifelong coverage and builds cash value over time. Although the premiums are higher, it doubles as a financial asset and a savings component to provide long-term security.
If you are newlyweds considering life insurance, speak with our friendly agent. We can help you find the best available life insurance coverage rates that suit your needs.