Life insurance is the bedrock of many people’s financial plan. There are more nuances to life insurance, than just buying a policy and paying premiums.
It’s not the most fascinating topic, unless you’re in the business, but understanding the basics about life insurance can have big implications for you and your family, according to a recent article, “4 questions to ask to maximize your life insurance benefits” from WTOP. Here’s what you need to know about life insurance:
Changed Circumstances. The amount of life insurance you need, is unique to each person’s financial and family circumstances. Remember that life insurance death benefits are used for more than just replacing immediate income from the family breadwinners. They can also pay off the mortgage and other debts, cover college tuition, create a retirement nest egg for a surviving spouse, fund a business transfer, or be an important estate planning tool. With life insurance, you can protect your family against a premature death with a solid safety net. In the event of divorce with future child and spousal support obligations due to you, you’d want your divorce settlement agreement to say that your ex-spouse, as payor, maintains a sufficient life insurance policy naming you, as the recipient-beneficiary, to cover all future commitments. You also need to be notified by the insurance company of any policy changes or lapses because you may be depending on this money in the future, should something happen to your ex-spouse. Stay-at-home spouses and caregivers also need life insurance, because replacing their duties could incur many unexpected costs for the survivor.