Choosing the right life insurance policy affects your family’s finances while you’re still paying premiums and when your loved ones have to cash it in following your death. If you choose the wrong type of life insurance for your current financial status, your family may have to deplete a sizeable portion of your estate long before it might otherwise have been necessary.
For this reason, it’s important to review the different types of life insurance policies you can choose from so you can maximize your estate in the long run. Keep in mind that you’ll probably want to revisit this issue every few years with your Georgia estate planning attorney, insurance broker and accountant.
Choosing the Best Type of Life Insurance Policy for Your Estate
- Whole life insurance coverage. This type of policy provides the same predictable premium from the time the policy is first issued until you pass away or reach an advanced age such as 90 or 100 – when premiums will no longer be due. Some people like the fact that if they took out one of these policies when they were fairly young, it will accumulate enough money at some point that they can actually borrow some of it from their insurer. However, if you do this, you’ll be paying interest on your own money. This type of accumulated wealth can also be used as collateral for a loan;
- Term life insurance. If you obtain this type of policy and die within a specific time period, the insurer will pay the funds to your beneficiary. However, if you outlive the stated term, the insurer won’t have to pay out anything. While this can be a less expensive type of insurance, you’ll have to be sure to inquire about it since agents may not readily mention it because they usually receive smaller commissions for it compared to other policies;
- Universal life insurance. When you’re covered by this type of policy, you’ll discover that it covers you in much the same way as whole life insurance – however, its cash value provides a more competitive rate of return. Depending on this type of policy’s specific terms, the insurer may allow you to change the amount of your premiums and how often you have to pay them. You may even be allowed to change the policy’s face value and voice your opinion on how your funds are invested;
- Split dollar life insurance coverage. Both you and your employer pay the premiums on this type of policy. When you die, the insurance company first pays part of the proceeds back to your employer to cover the company’s contribution – then the remaining funds are paid to your beneficiaries. Some people appreciate the tax advantages these types of policies can offer – depending upon their specific terms;
- Endowment life insurance. Although similar to both universal life and whole life insurance policies, this type of policy stops requiring premiums at some point when you’re between the ages of 62 and 65. When you reach that designated age, your policy’s cash value will just be the same as its face value at that time. When you reach the policy age limit; you are entitled to a lump sum payment. These premiums can be rather high since the insurance company knows it may have to pay out on the policy at a fairly early time.
- Be sure to periodically discuss the type of life insurance policy coverage you have with your Georgia estate planning attorney, as well as with your insurance broker and accountant. You’ll need to remain flexible regarding the type of policy you’re maintaining so you can best meet your family’s needs – both now and after you’ve passed away.
To obtain help with satisfying all of your Georgia estate planning needs, please contact the Law Offices of Shane Smith today. You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.