Most people who are creating or reviewing their estate plan consider purchasing a life insurance policy. If you are one of those people, the decision to purchase, or renew, a life insurance policy may be a difficult decision to make. We are bombarded with advertising that tells us we need life insurance policies, yet they may not be necessary in all estate plans. Discussing the decision with your estate planning attorney is your best course of action, but you may also wish to consider the following information.
Reasons to purchase a policy:
- Term insurance is generally very inexpensive
- If you do not have other assets or investments, term insurance may be the only way to provide for your family
- You can always decide not to renew if your financial picture changes down the road
- Buying a policy when you are young typically locks in a rate regardless of health issues down the road
- Benefits are paid immediately upon your death instead of having to pass through probate
- Whole life can provide an equity reserve as the policy grows
Reason not to buy a policy:
- Term insurance does not provide any equity
- Whole life and other variations do not typically provide a high rate of return
- If you have other investments and/or assets, you may not need life insurance
- Your premiums may go further in other forms of investment
- If you purchase a policy late in life, the premiums can be high even for term insurance
Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.