Family Protection Planning

What to do When Receiving Life Insurance Money

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Life Insurance Money

Recently, I contributed to an article about receiving life insurance money. The Q&A is below followed by a link to Melanie’s full article on the website Meet Fabric.

So do you have an order of things/checklist that people should go through when getting a life insurance payout? 

Receiving a life insurance payout is no different than a financial plan without life insurance proceeds. People have current needs to address. These vary from paying-off debt, building an emergency fund, saving for retirement, replacing the income of the deceased, paying for the final expenses of the deceased, etc. As a financial advisor providing comprehensive planning, I look at everything for my clients. So upon receiving a life insurance payout, the families needs are addressed first. Next, a go-forward plan is built upon their current situation.

For example, the proceeds going to a family who is debt free and the surviving spouse is still able to work. The priority may be to fund a college education account and increase retirement savings. In another example, the surviving spouse is a stay-at-home parent, and carrying mortgage and credit card debt. For this family, it may be in their best interest to pay-off the debt and use the remaining funds to support day-to-day living expenses. 

Also, one of the stories included someone who received a life insurance payout and kept the money in the interest-bearing account from the company and not get a check into her account. Do experts typically advise leaving it in the interest-bearing account, or taking it out and investing it instead?

Upon the death of a loved one, we encourage the beneficiary to receive the proceeds directly. This allows the beneficiary to pay final expenses and evaluate where the remaining proceeds should be allocated. If the beneficiary already has a comfortable savings account balance, and has a long-term investment plan, than yes, investing is a better option for long-term growth than an interest bearing account. Albeit, taking on more risk.


Do you have any tips for someone that is really emotional and maybe not in the best mental space to make financial decisions? How long should they wait to make a decision? How can they do what’s “best” for their money while dealing with grief? 

There is always emotional grievance. That is why hiring a financial professional to guide you through this period is essential. Your advisor will make decisions that exclude the emotions. Part of the planning I do for clients is to run updated scenarios, with the top industry software, of their financial position including the proceeds. This removes the emotions of planning and allows the family to make the best decisions, taking into account multiple options with their proceeds. As a fiduciary, I always serve with my clients best interests, whether a death in the family has occurred or not. It is important to work with a financial advisor who operates under the fiduciary standard of care. 

Follow this link to read the entire article: https://meetfabric.com/blog/what-should-you-do-with-a-life-insurance-benefit

Click here if you would like to learn more about your options and if we can assist you with your wealth management, retirement, and insurance planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Life Insurance – How to Make Sure You Have Enough

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Life insurance - How to make sure you have enough

It is often recommended to get life insurance when you are younger, but what if you do not buy enough coverage early on and later become wealthier or have a bigger family than you imagined? What options should you consider and when should you start planning? 

If you need more life insurance coverage as your family grows, buying an additional policy is often the solution. Most people will have life events occur which prompt the need for more life insurance, such as a growing family. And there is no reason not to apply for another life insurance policy to make up for the coverage your family needs. I often find couples I work with who have small starter policies in place. After evaluating their needs, it is often determined they are under-insured, and they want more coverage. Term insurance is a great option for families looking for the lowest cost coverage that provides protection for a certain amount of years. If the couple is looking for a permanent life insurance plan, there are options such as universal life and whole life insurance products to explore. As for the timing of the life insurance purchase, the younger and healthier you are, the lower the premium because you are less of a health risk to the insurance company. That is why if you need the coverage, the best time is right now.

Why is group life insurance not necessarily the best way to go? What are the downsides with group life insurance? 

Group life insurance is a great benefit to have from an employer. However, group life insurance has a couple disadvantages, such as, amount and portability. In terms of amount, group life insurance coverage often equates to 1-2 times annual salary, and most people need much more coverage than that for their family and/or estate. If you leave your current job to go to a new company or start a new career, the coverage does not necessarily go with you. Group plans also have rising premium cost. Whether it is annually or every 5 years, the cost of insurance goes up and it is not always covered by the employer. I recently helped a couple lower their insurance cost by applying for individual policies because over the policy term, it would be cheaper to have an individual policy.

What approach should people take to avoid being under-insured when it comes to life insurance coverage? How often should they review and how should they determine an ideal amount of life insurance coverage?

The approach people should take to avoid being under-insured when it comes to life insurance coverage is to have their plan reviewed at least annually. Life events and changes happen over the years and if you stay on top of your coverage needs, you will always have adequate coverage. There is no ideal amount of life insurance, nor rule of thumb. Everyone has a different need and desire for coverage. Working with an experienced financial advisor or insurance professional who can provide a life coverage analysis is the best way to know if you have the right amount of coverage for your family and estate.

Click here if you would like to learn more about your options and if we can assist you with your life insurance planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Term Life Insurance – What is it and how does it work?

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Term life insurance Erie CO

Term life insurance is a common coverage option for life insurance protection.  This type of insurance is the least expensive, making it affordable for families and business owners.  Term life insurance provides coverage for a specific number of years.  The number of years will depend on how long the policy owner would like to own the policy.  Term life insurance is available for coverage periods from 1 year up to 35 years.  Best of all, the cost of coverage will remain the same throughout the entire period!  Low cost allows the insured to purchase enough coverage to protect family, assets, and business in the event of death.  As with other types of life insurance coverage, the death benefit is tax free to the beneficiaries.

Term Life Insurance

Term life insurance Erie CO

For young families, this coverage can provide protection to your spouse and children.  For a small business owner, this can provide adequate coverage until the owner decides to exit. Whether they sell the business, retire, insure a key person, fund a buy/sell agreement, or utilized other succession planning.  The insurance policy is active unless a premium payment is missed, causing the policy to lapse. 

With proper planning, this should not be an issue.  At the end of the term period you have options to renew the policy for a specific number of years, convert the policy to a permanent type of coverage, or surrender (drop) the coverage because there is no longer a need.  If you are in the market for term insurance, or would like to meet with a professional advisor to review your options, contact us today!

Summary

  • Affordable – low cost for coverage allows for largest amount of protection for smallest premium compared to other types of life insurance
  • Specific Number of Years – Coverage remains in effect for a specific number of years that is decided when the policy is applied for
  • Options –  renew, convert, or surrender the policy at the end of the term period

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.