Estate Planning: Why You Shouldn’t Ignore Life Insurance
Many people buy life insurance when their families are young and their financial responsibilities are at their highest. But as you get older, even at retirement, life insurance can be a very valuable addition to your financial plan.
Here are a Few Reasons to Consider Life Insurance:
- Estate Taxes
Many consider life insurance as an estate planning tool. Benefits can be used to pay estate taxes rather than selling assets. If your liquid assets aren't enough to pay your estate taxes, consider purchasing a life insurance policy to cover them. Federal Estate taxes kick in for estates above $2 million.
- Final Expenses
Some people buy a small life insurance policy, just to cover their final expenses. Funeral costs alone average now more than $8,300, according to the National Funeral Directors Association. And you may leave some medical expenses not covered by health insurance.
- Pension Replacement
Many traditional pension plans pay benefits that are based on the life of the participant only. So when that participant dies, the surviving spouse no longer collects pension payments. Consider, too, that Social Security benefits will reduce at the death of a spouse.
- Outstanding Debts
For married retirees, having enough coverage to pay off large debts, such as a mortgage balance, can ensure the surviving spouse can stay in the home they love.
- Gift for a Loved One or Charity
Life insurance is a way to leave a legacy for a special person or charity. If you intend to leave a small sum of cash to either, consider using that cash to purchase a much larger amount of life insurance instead. Take the amount you plan to leave and use it to pay premiums. This could result in a much more generous gift over their lifetime.
- Dependent Children
If you had children later in life or have a child with special needs, ongoing support or medical care may become costly and last many years. If you have children who will be attending college, consider life insurance to help with tuition. In 2014, average public in-state academic institution tuition was $9,913, while out-of-state tuition was $22,958. Average private college tuition was a whopping $31,231.*
- Still Working?
If you continue to work after retirement – and your family relies on your income – consider life insurance for income replacement. Make sure your dependents are able to stay afloat financially without your salary.
If it makes sense to make life insurance part of your overall retirement strategy, it makes sense to purchase coverage now. The younger you are, the less it will cost and the less likely you are to be turned down for purchase due to health conditions.
*The College Board, Trends in College Pricing (2014)
Originally published by Good Sam Life and Health Solutions.