What to do if your life insurance is outdated?
When you bought life insurance, you probably intended to replace lost income if you died. Now that you’re retired, your kids are self-sufficient and the house is paid off, paying the premiums is a waste of money, right? Maybe not.
Before you let your policy lapse, consider how the proceeds from your policy may be able to accomplish different goals.
Passing on the family business
Many family businesses don’t last beyond the first or second generation because there is no structure for the child who has assumed the management role to buy out the other children when the parents pass away. Life insurance can provide the cash the estate needs to satisfy the appetite for “fairness and equity” of the non-managing children, as well as leaving the company intact and able to provide a living for the managing child’s family for generations to come. Without it, the business assets are often sold at a fraction of their value so they can be divided equally. Without the funds and equipment needed to operate, the business is condemned to fail. Thus, the family’s legacy along with the managing child’s golden goose are offered upon the altar of “fairness and equity.”
Providing for a disabled child
Parents of a disabled child often provide support throughout that child’s life. The deaths of the parents can end their retirement income and eliminates the source of the disabled child’s support. Life insurance can be used to allow that support to continue.
Leaving a legacy
Many people who are generous during their life, miss out on a wonderful opportunity to leave a legacy upon their death. For example: A $100K policy may have an annual premium of $1,500. If you let the policy lapse and gave all the saved premiums to charity for the next 10 years (remainder of your life), they would receive $15,000. If you continued the policy and named the charity as the beneficiary of the policy, it would receive $100,000 upon your death. If given the choice, most people would gladly exchange the nominal gift received today in exchange for the significant life insurance proceeds they would receive as a beneficiary on your policy.
Upgrading can mean paying less
Recently we helped a woman, age 65, with an existing policy with a death benefit of $100,000 policy. She was paying $1,932 per year. The policy had a cash value (equity) of $23,000. She was able to move the $23,000 equity to a new carrier and receive the same coverage for $456 per year (guaranteed until age 125). She was able to save nearly $1,500 per year in premiums.
If you have dependents at home that rely on your income, life insurance is a must. If you are retired and questioning whether you should continue a policy you bought years ago, it is critical that you learn about all of your options before you allow the policy to lapse. The policy you have could be exchanged for a much smaller premium and provide a much larger inheritance for your family or preserve your legacy with your favorite cause. To learn more, join us at an upcoming seminar.
Attorney Shawn Garner hosts free monthly seminars about wills, trusts, and long-term care. The next seminars will be 6 p.m. Sept. 13 at Main Library and 10:30 a.m. Sept. 15 at Foothills Library. RSVP by calling (928) 7834575 or visit YumaEstatePlanning.com.