National Insurance Awareness Day

June 28th was National Insurance Awareness Day 

June 28th was National Insurance Awareness Day, a day which serves as a reminder to review your current policies and to consider adding additional plans which may further secure the needs of your loved ones or favorite charity. Life insurance in estate planning is often overlooked and misunderstood. Here are some key points on why life insurance can be a very valuable protection for your survivors. 

1. Financial Protection for Loved Ones

One of the primary reasons to include life insurance in your estate plan is to provide financial protection for your loved ones in the event of your untimely death. Life insurance can help replace the loss of your income, pay off debts, cover your final expenses, and provide for the financial needs of your family members. It is especially critical for those who have children at home. Imagine needing to uproot children at an already difficult time because with only one income you can no longer afford your home. 

2. Estate Liquidity

Estate planning involves the transfer of assets to your beneficiaries after your death. However, many assets may be illiquid and not readily available to cover immediate expenses or estate taxes. Life insurance can provide the necessary liquidity to pay estate taxes, debts, and other final expenses without the need to sell off assets at an already difficult time.

3. Equalizing Inheritances

If you have assets that you wish to leave to specific beneficiaries but want to ensure an equal distribution among your heirs, life insurance can be used to equalize inheritances. By naming beneficiaries for the life insurance proceeds separate from your other assets, you can help prevent conflicts and ensure that each heir receives their fair share of your estate.

4. Business and Farm Succession Planning

For business and farm owners, life insurance can play a critical role in ensuring the smooth transition of ownership in the event of your death. By establishing a buy-sell agreement funded by life insurance, you can provide the necessary funds for the remaining business owners to buy out your share from your heirs while at the same time maintain the continuity of the business without financial strain.

5. Minimizing Estate Taxes

Depending on the size of your estate, it may be subject to estate taxes upon your death. Life insurance can be used as a tool to help minimize the impact of estate taxes by providing tax-free proceeds to cover the tax liability. This can help preserve more of your estate for your intended beneficiaries and reduce the tax burden on your heirs.

6. Naming your favorite charity as a beneficiary in your current life policy or new policy is a way to support your favorite cause in a significant way with an impact beyond your lifetime. For existing policies, this can be as simple as contacting the company and updating your beneficiaries. 

It is extremely important to own your own policy. More times than not, policies through an employer are often not portable, meaning you cannot take them with you when you leave or the premium will be high (this can include leaving due to illness).

Do not delay owning your policy because rates increase as you age. Also, certain health conditions can create more challenges with insurance underwriting. 

Consulting with a qualified estate planning attorney or financial advisor can help you determine the appropriate type and amount of life insurance coverage to meet your specific needs and goals. By carefully considering the role of life insurance in your estate plan, you can create a comprehensive strategy to safeguard your legacy and provide for your loved ones and/or your favorite charity long after you are gone.

For more information contact Leigh Lillibridge at (308) 385-5333 ext. 112