As a conversation starter, Life Insurance is almost guaranteed to be followed by the kind of silence normally only found in a hearing test chamber. After all, when you talk about life insurance, you are really talking about death. And who wants to do that? So let me break the silence and give you some tips to help get your conversation started when it comes to this all-important coverage.
- Non-taxable death benefits. I am surprised how many times I am asked about the tax burden of life insurance benefits. The typical response: None. This is because life insurance proceeds, whether $10,000 or $10 million, are generally exempt from income tax.
- The term can change to permanent. “Which is better, term or permanent?” is a matter of common life insurance. I normally encourage people to look at why they are buying the cover to come up with an appropriate answer. For example, term insurance is probably the right answer for coverage to cover expenses associated with raising children, because eventually (fingers crossed) they will be financially independent. However, if you find yourself in a situation where permanent coverage seems more appropriate than your current term, conversion may be the solution. Many term policies offer the option of converting a term policy to permanent coverage. Check with your insurer for the rules, deadlines and costs associated with such a move.
- The beneficiary overrides your will. If your legal will clearly states who receives your assets when you die, make sure your life insurance beneficiary provisions match.. A beneficiary designation – this is the part of the life insurance application where you indicate who will receive the proceeds – will replace what is in your will, and the life insurance money will pass directly to the beneficiary, regardless of it doesn’t matter what your will says. Although naming your estate as a beneficiary allows your will to ultimately control who gets the life insurance, some people want the least amount of assets subject to probate.
- The benefits can be exploited early. If you are terminally ill, many insurance policies allow you to tap into a portion of available death benefits to pay for medical costs. This provision, called the Accelerated Death Benefit Rider, can go a long way in easing the financial burden of a critical illness. Policies vary, so check with your life insurance company for details.
- Get covered – it can be cheap. Young families generally have fairly significant life insurance needs. The average cost to raise a child in the United States is around $20,000 per year, according to the United States Department of Agriculture.. And that doesn’t include college! My point? Everyone should look at your coverage using an online life insurance calculator to see if it’s enough. Amazingly, a 25 or 30 year old man could get $500,000 coverage for $20 or $30 a month and be locked up for the next 20 years…until his kids are alone (still working knock on wood ).
- It’s flexible. You might think life insurance is stifling and inflexible. As I mentioned earlier, the reality is that many policies allow you to upgrade to different levels or types of coverage. Some even allow you to waive premiums if your budget is tight. So if you’re considering removing or adding coverage, make sure you understand all the details. Obviously, you’ll want to check with your insurance company so you don’t make a mistake.
Surprised? Either way, now is the perfect time to reset your own life insurance.
Get the coverage your family needs
FSGLI, TSGLI, VGLI, SGLI… the long list of acronyms and minima may not be enough to cover your family’s needs. Explore life insurance options with our free tool, which compares rates and matches you with the coverage you want.
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