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How to create an effective inheritance using life insurance

January 8, 2021 / 4 min read

Life insurance can be an ideal tool for leaving an inheritance to those you care for — consider it an integral part of your financial and estate plan. Our experts unpack the benefits and how it works.

At its core, life insurance is a very simple concept. You pay a certain amount, typically on an annual basis, for a policy that will pay your designated beneficiaries a meaningful sum of money at your death. But just because people understand it doesn’t mean they like to talk about it. You see, the words “life insurance” often generate anxiety. In some cases, that’s because it’s associated with end of life; in others, it’s because of negative product experiences in the past. Whatever the reason, however, life insurance can be an ideal tool for leaving an inheritance to the people you care for. Failing to consider it as part of your financial plan can be a real missed opportunity. Let’s unpack that a bit.

Life insurance can be an ideal tool for leaving an inheritance to the people you care for.

Let’s start with term or “temporary” life insurance products.

The most inexpensive life insurance products are term life policies (either individual or group), also known as “temporary” policies. Term life policies are designed to last for a specific period, not for one’s entire life. It should be no surprise, then, that only a small percentage of term life insurance policies ever pay a death claim — nearly all eventually lapse. Term insurance is much like fire, auto, and medical insurance — you pay purely for the protection with no cash value accumulation. Although term life can, and in some instances will, leave an inheritance, a longer-term solution should be considered if this is the ultimate goal.

That’s where permanent life insurance products come in.

Where term life insurance is designed to last for a specific period, permanent life insurance can be designed to last for one’s entire life, ensuring an inheritance for the next generation. There are many types of permanent life insurance products, the details of which are beyond the scope of this piece. But regardless of the specific product type, a properly designed and monitored permanent life insurance policy will ensure a death claim is ultimately paid and that your beneficiaries are provided an inheritance.

Permanent life insurance addresses several inheritance-related matters:

Life insurance can provide useful inheritance benefits.

About 60% of all people in the United States were covered by some type of life insurance in 2018, according to the Life Insurance Marketing and Research Association (LIMRA) 2018 Insurance Barometer Study. That’s because, if purchased and structured properly, it can provide useful inheritance benefits regardless of when death occurs and should be considered an important part of one’s overall financial and estate planning strategy.

If you have life insurance related questions, please give us a call.

Securities are offered through Valmark Securities Inc. member FINRA and SIPC, an unaffiliated securities brokerdealer.

The material contained in the herein is for informational purpose only and is not intended to provide specific advice or recommendations for any individual, nor does it take into account the particular investment objectives, financial situation or needs of individual investors. Consult your financial professional before making any investment decision. The information provided has been derived from sources believed to be reliable, but is not guaranteed as to accuracy. Valmark Securities supervises all life settlements like a security transaction and its’ registered representatives act as brokers on the transaction and may receive a fee from the purchaser. Once a policy is transferred, the policy owner has no control over subsequent transfers and may be required to disclosure additional information later. If a continued need for coverage exists, the policy owner should consider the availability, adequacy and cost of the comparable coverage. A life settlement transaction may require an extended period to complete and result in higher costs and fees due to their complexity. Policy owners considering the need for cash should consider other less costly alternatives. A life settlement may affect the insured’s ability to obtain insurance in the future and the seller’s eligibility for certain public assistance programs. When an individual decides to sell their policy, they must provide complete access to their medical history, and other personal information.

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