Life Insurance Policies:Tips and Considerations

Life insurance is a vital estate planning tool for any individual with dependents who will require financial help after the individual dies. Some tips to help navigate the numerous issues involved with life insurance policies are below:

1. Older individuals will need less coverage now than in previous years as their life spans have decreased. Older individuals in reasonable health should consider purchasing ten to twenty year term coverage. 
2. Individuals with poor health may have the option of converting an existing term policy to cash value coverage without undergoing a health exam. This option is expensive but is cost efficient if the individual has a short life expectancy.
3. No-lapse universal life can provide coverage for over twenty years and have lower premiums than traditional cash value policies. Though these policies are not very flexible, the guaranteed death benefit can last for as long as the policy holder wishes.
4. Individuals in need of life insurance but who are unable to afford premiums on current cash value policies may be able to turn their current policies into smaller, paid-up policies that last for life. These individuals also have the option of using dividends to cover future premiums.
5. Five options exist for individuals who have cash value polices they no longer need: (1) cancel the policy, (2) keep it as an investment, (3) sell it for more cash than its current surrender value, (4) transfer cash values into an annuity, tax free, or (5) use the cash value to acquire a long-term care policy.

See Jane Bryant Quinn, Questioning Life Insurance, AARP Bulletin, Apr. 6, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.