Tag: term life insurance

Do You Need a Will If You Already Have Life Insurance?

Do You Need a Will If You Already Have Life Insurance?

If you already have life insurance, you may wonder why people keep saying that you need to make a will. Life insurance sounds like it will help your family out if you are not around. There are many reasons to make a will in addition to paying for life insurance.

  1. Life Insurance Provides a One-Time Payout to One Person

Life insurance requires you to make premium payments to an insurance company over time. If you pass away while the policy is in effect, the insurer will pay a lump sum to your chosen beneficiary. You can choose one or maybe more beneficiaries, but they only receive one payment. Depending on the type of policy, your family may only receive enough money to replace your income or pay expenses for a year or two. After that, the insurance will no longer help them.

In contrast, you can use a will to make gifts to many people. You are not limited to one or a few beneficiaries. Further, you can even use a will to roll your assets over into a trust. The trust can make payments to your family over time, and the trust assets may even grow in value.

  1. No Premium Payments or Term Required for a Will

To maintain life insurance, you have to make premium payments on a regular basis. These payments may not seem expensive at first. But if you fall on hard times, you could lose the insurance. You do not need to make regular payments to “afford” a will. Once you and your witnesses sign it, it will remain in effect until you die or change the will.

Further, many younger people purchase term life insurance, which stays in effect only for a specified term (such as 10 years). After the term ends, you are no longer covered. Older people often buy policies that last longer but end up costing a lot of money in premiums. Again, a will stays in effect for as long as you want with no extra cost.

  1. Dispose of All Your Assets with a Will

Life insurance assures a payment from the insurance company to a beneficiary. It has no effect on distribution of your assets after you die. You may not think you have many assets to distribute. But if you have a house, own stock, have valuable jewelry, or own a car, you have assets. Further, you might want those assets to go to specific people after you are gone. A will can give you peace of mind that your wishes will be carried out.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

How Can You Make Life Insurance Part of Your Estate Plan?

If you would like to protect your family in the future, you may want to make life insurance part of your estate plan. While life insurance isn’t something that estate planning attorneys prepare, they can advise you on integrating it with the rest of your estate planning structures.

What Is Life Insurance?

Life insurance provides a lump sum monetary payment to your chosen beneficiary if you were to pass away. Life insurance companies offer these payments in exchange for your payment of monthly premiums on your policy. Usually, you must undergo a health exam and fill out a lot of paperwork before your coverage can begin.

Insurance companies offer several types of life insurance, with the most common being term and whole-life. Term life insurance lasts for a specific time period such as ten or twenty years. It is less expensive than whole-life, but it gets more expensive as you get older. Coverage ends when the time period ends unless you renew the policy. Whole-life insurance covers you for your entire lifetime. The policy builds cash value as well as a death benefit payment. You can borrow against the cash value or invest it. Although you may have the option of purchasing whole-life without a medical exam, it will be more expensive.

How Can Life Insurance Be Part of an Estate Plan?

An estate plan aims to distribute a deceased person’s assets according to their wishes. Some people make estate plans with the intent of supporting loved ones left behind. But their cash on hand and other assets might not be worth much money. If they paid for life insurance, though, their chosen beneficiary will receive a cash payment to use for any purpose they wish.

It is even possible to name a trust or business as the beneficiary of a life insurance policy. Before you take this step, you should talk to an estate planning lawyer and your accountant about potential tax consequences. Since a life insurance policy pays out in a lump sum, the beneficiary will owe taxes in the year the payment is received – which can be quite expensive.

All in all, life insurance is a great addition to a comprehensive estate plan because for your monthly premium payments over time, your beneficiary can receive ready cash on hand to cover expenses. If you have fewer cash assets or relatives who would need immediate support without your income, consider life insurance.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

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