Life Insurance As Part Of An Estate Plan

Many people, when they think about estate plans, have the idea that they are complex and difficult to work with. However, most estate plans are made up of some very familiar financial instruments. Life insurance should be part of everyone's estate plan because they are easy ways to leave money to loved ones and others. Read on to find out more.

Two Types of Life Insurance

You can purchase whole life or term life insurance and they differ in these ways:

  1. Whole life insurance is valid for the life of the named owner. The premiums must be kept up to date, however. Once you pass away, the funds, which are available in almost any denomination you wish, are paid to the named beneficiary or beneficiaries.
  2. Term life insurance is valid for a set period of time. The term can be 6 years, 10 years, 25 years, or any period you desire. Once the period expires, so does the coverage. If you pass away within the term, the money goes to the named beneficiaries. This type of coverage may be good for those needing coverage for only a certain time period. For instance:
  • While your children are young.
  • Until your mortgage is paid off.

And more. Term life can be less expensive than whole life and, in some cases, no medical exam is required.

Life Insurance and Probate

Many people have heard about skipping probate and life insurance is one of the easiest ways to do that. Life insurance policies are not considered a probate asset, so it stands alone outside of the probate process. For loved ones, that means immediate access to funds to cope with funeral and burial arrangements and more. For example, if you don't have funeral plans already in place and paid for, many funeral homes will accept an insurance policy for payment. The funeral homes then either bills the family for the balance for their services or refund them any overages.

Life Insurance and Beneficiaries

It's vital to keep a close watch on your policies to ensure they are enough to cover your needs. As your needs change, you should adjust your policies. For example, if you remarry after being widowed, ensure that the name of your current spouse is listed on the policy rather than the previous spouse. Also, make sure that the beneficiary is living. In some cases, life insurance policies with a deceased beneficiary must be probated along with the rest of the estate.

For more information, call an estate planning attorney.


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