Life Insurance can be an important part of estate plans. However, many mistakes can be made concerning it.
One of the problems many people have in their estate planning, is providing a way to get needed cash to family members. This can be the result of creating wills that will take a long time to get through probate. It can also be the result of not having that many assets in the first place, which can be a problem for parents with young children to support.
Life insurance is a possible solution that can solve both these problems. However, mistakes are often made, as Wealth Management discusses in "Eight Life Insurance Mistakes Clients Make."
Common mistakes include:
- Not buying life insurance at all, when people have good reason to do so.
- Buying too little coverage to meet the expected needs of minor children.
- Many people purchase the wrong type of coverage for what they need.
- Just getting life insurance from their current employer's benefit plan, instead of shopping around and then leaving jobs and losing coverage.
- Not purchasing any coverage for stay at home parents, since the breadwinner will need to take more time off work, should anything happen to the other spouse.
- Purchasing a policy that only offers coverage until children reach the age of 21, instead of funds for college and when getting started in their careers.
- Not creating a trust to handle any payouts, after a child reaches the age of 18, especially when the child is still too young to manage it.
- Canceling a policy as soon as possible, before making sure the child will not need it, if something happens to the parent.
Reference: Wealth Management (May 25, 2018) "Eight Life Insurance Mistakes Clients Make."
Suggested Key Words: Estate Planning, Life Insurance