It’s Not Too Late to Consider Life Insurance

Most Americans believe that it’s important to provide for their families after they are gone.¹ But what if your children are grown and/or you have substantial assets? Should life insurance still play a role in your overall financial picture?

Results from one survey suggest that confidence in financial security tends to increase as life insurance coverage increases.² Although your life circumstances may have changed significantly since the days when you bought life insurance to protect dependent family members, you may still have some compelling reasons to consider owning life insurance.

Retirement for Survivors

A surviving spouse who is suddenly faced with a smaller income may be tempted to cut back on retirement contributions. Proceeds from a life insurance policy can help ensure that the survivor has enough money for a comfortable retirement.

Quick Cash Infusion

Life insurance proceeds typically are not subject to probate or income taxes. As long as everything is in order, beneficiaries usually can expect to collect the death benefit in a matter of weeks. The money might even serve as a lifeline if significant medical expenses are looming just as the family’s income ceases.

Money to Pay Debts, Expenses, and Taxes

The primary reason to own life insurance is to cover expenses that would otherwise fall onto dependents who may not have the means to pay them. Even if they have the means, you may not want to leave expenses or debts behind for others to pay out of their own pockets. Life insurance proceeds can be used to help pay any estate taxes and probate costs, as well as final expenses and any outstanding debts.

Family Legacy

Life insurance proceeds represent an opportunity to make a significant charitable contribution or leave an inheritance for loved ones. The money can even go toward higher-education costs for children or grandchildren. You might also find that it makes sense to leverage money you had earmarked for a donation by using it to purchase a life insurance policy with the charity named as beneficiary.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.

As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Before you take any specific action, be sure to consult with your tax professional.

1) MarketWatch, September 23, 2008
2) Journal of Financial Planning, December 2008

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by StoneRiver–Emerald. © 2009 StoneRiver, Inc.