Questions & Answers

The life insurance questions answered in this section contain frequently asked questions as well as questions you may have never considered but should. Please don’t hesitate to submit a question to us and who knows, it might even show up here!

Q. Why would you want to appoint a trust as the beneficiary as your life insurance policy?

A. There are a lot of pros and con’s to this subject, but I will name a few of the positive things when setting up a trust to receive the funds from a life insurance policy.

A trust can:

• Hold the money in a secure location so that a spouse or children may only spend the money in a timely manner.  This can prevent emotions from persuading them they need a 10,000 sq ft house b/c the 2,500 sq ft house just had too many memories of you.
• Make sure your beneficiaries (children in this case) are of a competent mind and are not participating in any illegal activities.  Ex: No drugs, not in jail, responsible adults
• Make disbursements of the life insurance proceeds to the charity of your choice.  Sometimes your children may not think the charity you have chosen is one that should receive donations.
• Sometimes you may want to protect your children from having your spouse remarry and having a deadbeat come in and spend all the money.  This happens quite often.  I have a friend that setup a trust to only distribute annual funds to his wife as long as she was single.  If she remarried the trust was to hold onto the money till the children reached the age of 25 and had steady jobs or were business owners.

Think about this:  Let’s say you are married with 2 kids and have a 2 million dollar life insurance policy to take care of your spouse, kids, mortgage, college expenses, and any other major expenses over the next 15 – 20 years.  Well 3 years after you pass away your spouse meets an individual who sweeps them off their feet.  Then 3 years later your spouse finds out that this individual was terrible with money and everything you left them is gone.  Now the kids have to take out a student loan for a college education, take out a loan to get a dependable vehicle to get them to and from college, and will not have any type of security when the leave college.

This example happens way more than people think.  A trust is not mandatory, but it sure can give you some peace of mind knowing that your money will be handled properly when you are gone.

Q. What are the benefits of owning life insurance?

A. The benefits of owning life insurance are pretty clear cut.  These policies provide financial security and sustainability for your family or business after you are gone.  Buying life insurance gives you a plan to pay for your future financial obligations should something happen to you in the upcoming future.  Term Life insurance is a great way to provide a financial blanket of protection over your family for the future.

Life insurance offers your beneficiaries
left behind the ability to cover expenses like:

• Funeral Costs
• Taxes
• Medical Bills
• Legal Fees
• Debt Reduction
• Clothing
• Food
• Utilities

Life insurance also provides financial security
in the future by covering expenses like:

• Mortgage Reduction/Elimination
• College Tuition
• Normal living expenses
• Business obligations
• Retirement fund for spouse
• Gifts to churches, universities, or non-profit organizations

Q. Are You Underinsured?

A. Over the last 20 years term life insurance rates have dropped approximately 75%, and still the majority of people are underinsured. Over twenty percent of families with dependent children say that they do not have enough life insurance coverage.  Twenty-eight percent of wives and 15% of husbands do not even have a life insurance policy, and 10% of families with dependent children do not have any life insurance protection at all.

The average 40 year old male, non-smoker can purchase a 20 year term/$500,000 policy for about $350 a year/$30 a month.  With prices being this low and a families protection being so important it does not make any sense why this coverage would not be purchased.

Who will pay the mortgage or rent if something happens to you? What about car payments, credit card bills, student loans, and the thousands of other expenses that you see each month?  Just a few short steps and a very small investment can secure your families future if something were to happen to you.

Q. How Long Should You Insure For?

A. Many people avoid thinking about the certainty of death. If there are people who depend on you and your income, it is one of those unpleasant things that you have to consider.

If you have dependents or debts that outweigh your assets, then you likely will need insurance to ensure that your dependents are secure if something happens to you.

The number of years' coverage you need depends on several things, but the most basic consideration is how long you expect your beneficiaries to be dependent upon your income. If your spouse is your beneficiary, you should consider being covered until you plan to retire. If it's your children, you'll probably want to protect them until they're 18 or finish college. To cover a mortgage, choose a policy that will be in place for at least the length of the loan. If you want to pay for your child's college tuition or have your spouse move to Hawaii when you are gone, you will have to estimate the costs of those obligations and add them to the amount of coverage you want.