Life Insurance Awareness Month: Making Sure Your Loved Ones Are Protected

Life insurance can feel like a tricky subject to navigate. It is one of those things that you hope you never need but it could be necessary to have to protect your loved ones.

September is Life Insurance Awareness Month, so we want to take the time to walk through what you need to know about life insurance. This month is the perfect reminder to reevaluate the coverage you do (or don’t) have.

What is the purpose of life insurance?

You may think that the only answer is to replace your income in the event of your death or to cover the cost of a funeral (though this is a big part of it!). While many young parents buy term insurance for that purpose, the reality is there may be several reasons to purchase life insurance.

Purchasing life insurance to replace your income in the event of your death can help ensure that your loved ones can pay the bills or even pay for your children’s college education if you are gone. However, did you know that less than 2% of the term policies will receive a payout?1 That doesn’t mean you shouldn’t have it for this purpose! That’s just to say that this reason to purchase term life insurance acts as a safety net in the event that you are among those who use the coverage for this purpose.

Another reason you may consider buying certain types of life insurance is to pass on money to your loved ones tax-free. This can be a good reason to make sure you have life insurance, especially as you get older. There are life insurance options that can not only leave tax-free benefits to your heirs but can also provide you with tax-free income² or help pay for long-term care expenses, by purchasing additional health care riders. Make sure to chat with a licensed insurance professional to discuss your goals and what life insurance policy may be best help you achieve those goals.

All in all, life insurance has a lot of value!

Learn More: Episode 7: Is Life Insurance Valuable?

Do you have enough life insurance?

How do you know if you have enough life insurance? The key to finding this answer is to first ask what your goal for life insurance is. If you want to replace your income in the event of your death, cover daycare for your children, and provide enough funds if your children would like to go to college, then you need to consider how much life insurance you’d need to actually provide for those goals.

If you are a parent with young children, $200,000 may sound like a lot when you are looking at options, but that doesn’t stretch as far as you may think it would. Make sure to consider what you would like life insurance to accomplish and what that would cost should your family need it tomorrow.

Are your beneficiary designations updated?

 This is one of those things that people often forget to update or even set-up in the first place! If one of these scenarios happen, that typically means the state or life insurance company will get to decide where your policy’s death benefit will go.

Make sure you have made it clear who (or what organization) should get your money in the event that you pass away. Also, plan to review and update your beneficiaries regularly. This means adding any additional children you have and making sure you have a secondary beneficiary – referred to as a contingent beneficiary – set-up as well.

Should you consider long-term care insurance?

It used to be that life insurance would only pay out in the event of your death; however, there are many different forms of life insurance that can benefit you now in other ways, too. One of these options is called a long-term care rider, which you can purchase on many life insurance policies.

If you end up in a nursing home or a long-term care facility, the national average stay is two years.³ If you wouldn’t have the funds on-hand or assets to cover the cost of your stay, or if it’s more likely you will end up in long-term care based on your health situation, you may want to consider your long-term care insurance options.

Depending on the level of care you require, the cost to stay in a long-term care facility is around $80,000 – $100,000 per year.⁴ Meeting with a licensed insurance professional and financial advisor can help you assess if you should consider long-term care insurance based on your specific situation.

Life insurance may feel like a tough topic to navigate, but it is well worth the trouble. Life insurance can help protect your family in the unexpected event of your passing, help pass on funds tax-free to your heirs, and also offers numerous other benefits and features, including long-term care options, should you need it as you age.. If you would like specific advice to know how life insurance may fit into your financial plan, reach out to our advisors here at 210 Financial for a complimentary Retirement Blueprint Review!

 

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210 Financial is more than just numbers. The “210” in our name stands for a childhood home that represented safety, love, and family. That is what we want to provide for everyone that we care for. Welcome home. Welcome to 210.

Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender charges. If properly structured, proceeds from life insurance are generally income tax free. Life insurance agents do not give legal or tax advice.

Life insurance policies are subject to medical underwriting, and in some cases, financial underwriting. Long term care benefits are NOT a replacement for long term care (LTC) insurance and are not available on all life insurance products. They may not be available in all states. Addition of a LTC rider may require an additional fee. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company

210 Financial is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and 210 Financial are not affiliated companies. 1479802 – 9/22

Content prepared by Savage Content Collective

 

1. Insurance Group, J. (2022). Payout likelihood and cost difference. The Jordan Insurance Group, LLC. Retrieved September 15, 2022, from http://jordanig.com/individual-insurance/life-insurance/payout-likelihood-and-cost-difference/

2. Policy loans and withdrawals will reduce available cash values and death benefits and may cause the policy to lapse or affect any guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change. You should consult a tax professional.

3. Breeding, B. (2021, May 4). So I’ll probably need long-term care, but for how long? myLifeSite. Retrieved September 15, 2022, from https://mylifesite.net/blog/post/so-ill-probably-need-long-term-care-but-for-how-long/#:~:text=Across%20the%20board%2C%20the%20average,days%2C%20or%208.9%20months.)

4. Hoyt, J. (2022, August 11). Nursing home costs in 2022 by state and type of care. SeniorLiving.org. Retrieved September 15, 2022, from https://www.seniorliving.org/nursing-homes/costs/