What Next After You Buy Your Life Insurance Policy?
A lot of factors go into the determination of the life insurance policy which is perfectly suitable for your needs. In addition, just like other parts of your total financial plan, the insurance program does not come to an end the time you decide on the suitable policy and purchase it.
There are some actions and decisions you should take with regards to your life insurance policy and that includes who should own the policy as well as the plans you have for funding the premiums. Also, it is necessary to monitor the policy on a regular basis so as to ensure it keeps performing up to expectation and maintain suitability for your objectives. All these factors shall now be considered one after the other.
There are different options available when you are trying to determine who ought to be the owner of your life policy.
There is an option under which the insured owns the policy. This particular option has been described as that with the highest flexibility as it gives adequate room to make amendments such as the selection of designated beneficiaries or termination of the policy. On a general outlook, the proceeds of the policy are made part of your estate. That is majorly for taxation purposes upon death.
The second option is where the policy belongs to the spouse or any other member of the family. In this option, your control is reduced particularly where you are the or who is insured. It, however, has the potential for different tax deferral advantages. Generally, upon death, the proceeds of the policy are not included in your estate. Rather, they are made a part of the estate of the policy owner even in a case where the policy owner dies before you.
Another option is where the owner of the policy is the irrevocable life insurance trust, also called ILIT. The life insurance policy under this option is deemed to be an irrevocable gift given to the trust and the control of the policy is in the hands of the trustee. The general rule is that the proceeds of the policy are excluded from the insured’s estate as well as that of the beneficiaries of the policy. As such the trust, in this case, offers potential asset protection and tax advantages.
After making the decision as to who the policy owner would be, the next important decision is that of the suitable funding method for the premium putting into consideration your circumstances and selection. Just like a lot of life insurance policyholders, you may find that the most suitable is a combination of different strategies. When determining how to make your premium payments, you should consider these following techniques.
- Outright Payment
- Loaning the fund to the trust or policy owner
- Payment with existing trust asset where such exists
- Payment with proceeds gotten from the termination of grantor retained annuity trust
- Splitting cost with an additional party
It is important to ensure that the premium payments are made on time so you avoid forfeiting the benefits. Also, policies that are owned by trust have special administrative requirements and you may have to regularly pay attention to these requirements.
As soon as you set up your policy, you need to take conscious effort to carry out a periodic review to ensure that it satisfies your objectives, particularly where major life events like marriage or divorce happens. A periodic review of the insurance carrier’s financial strength for different issues that could likely have an effect in its survival on the long run or its ability to make payments should also be carried out.
Insurance providers, as well as life insurance policies, can be quite complex to grab and it is advisable that you set up a meeting with an insurance professional or a financial advisor whom you trust.
Such an expert would help you when you are choosing a policy as well as when you have to deal with the administrative details. Also, these experts can help in monitoring your policy and also carry out a routine reevaluation of your policy’s features to ensure its propriety for your financial goals and personal circumstances.
More in Insurance
Genius Mind behind Super Mario Offers Handy Career Advice
Let’s first agree that there are some childhood constants for every generation. Things like hatred for broccoli and spinach, fear of...October 2, 2020
Self-Sabotage in Career Development: How Can You Avoid Falling into This Trap?
How many times have you promised yourself you’re going to skip the morning Starbucks but ended up breaking that vow over...September 25, 2020
Mistakes You Must Avoid While Building a Financial Model For Your Startup
One of the most critical factors behind a startup’s success is its financial stability. And a robust money model can ensure...September 25, 2020
Biggest Real Estate Industry Myths, Debunked! Plus, How to Start a Career in this Lucrative Field
Not many fresh graduates would consider real estate as their first career choice since this industry was branded as unstructured and...September 24, 2020
Thinking of a Career Change At the Time of the Pandemic? Here’s What You Need to Know
There may be no better time to think of a career change than now. After all, the uncertainty brought about by...September 24, 2020
Effective Tips On How to Change Careers During The Pandemic
Coronavirus has impacted the lives of everyone in this world. No-one could have imagined in 2019 that the major parts of...September 21, 2020
Thinking of Pursuing a Career in Agriculture? Take a Look at These Tips First
Competition in the employment sector has always been fierce, and things have only worsened because of the pandemic. Getting jobs has...September 18, 2020
The Most Secret Advice That Can Change Your Career Forever
Have you ever wondered what makes the most successful people prosperous? Is it the loads of money they make? Is it...September 17, 2020
This Advice From Oprah Winfrey Will Change Your Career & Life
Life can often become burdensome, and when it starts to get to you, you may feel like giving up. But no...September 17, 2020