Getting the Most Out of Your Life Insurance

Individuals who do not have a good life insurance plan in place can be playing with real fire.

Life insurance is a great vehicle, especially for parents of young children and those who support a spouse or a disabled adult or child.

Along with helping to support dependents, life insurance can assist in providing immediate cash at death. Life insurance proceeds are a handy source of cash in helping pay the deceased's debts, funeral expenses, and income or estate taxes.

Life Insurance Decisions to Make

When deciding what the best course is for you to take regarding life insurance, think about the following items:

Q: How much money would your dependents require for living expenses if you passed away?

A: A way to determine this is to review the earned income figure that you provide for your dependents on a regular basis. Take the amount and subtract the worth of property they would inherit from you and any figures that will be accessible from public sources or private insurance plans already providing coverage. Also subtract any other potential modes of income that may be available.

Q: What assets would be an option to support your dependents' immediate financial concerns?

A: Some money may be available in joint or pay-on-death bank accounts. You could also set marketable stocks in joint tenancy or register them with beneficiary forms.

Q: Following your death, what is the time process involved prior to your property being turned over to your inheritors?

A: Should the majority of your property avoid probate, you will find little need for insurance for short-term expenses, unless you do not possess bank accounts, securities or other cash assets. On the other hand, if most of your property is transferred by will and will be held up for months in probate, your family and other inheritors could require the ready cash insurance can provide.

Q: Will Your Estate Be Responsible for Major Debts and Taxes Following Your Death?

A: Cash and assets that can be quickly transformed to cash are known as "liquid.' Should your estate be compiled of mostly all "non-liquid' assets such as collectibles, jewelry, real estate, etc. there could be major financial issues if these assets need to be sold in a hurry to raise cash to pay bills, as opposed to what they could be sold for at a later date if there was enough liquid money from insurance or other options to meet bills. Should your estate have significant funds in bank accounts or marketable securities, you won't require insurance for this purpose. Also note that federal estate taxes will not be due until nine months following death, so cash to pay them will not be needed immediately.