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Life Insurance - The Final Years

Life insurance for the final years of life is generally a great idea. A death benefit can be a very valuable financial resource for a surviving spouse. When one member of a couple passes away, one of the Social Security benefit checks will disappear....the smaller amount of the two.

This obviously leaves the survivor with less income. Sometimes, pension plans also stop paying when the person receiving the pension payments dies. Life insurance can help cover these income deficits.

Beneficiaries never complain about too much life insurance. However, the biggest challenge with having life insurance could be the ongoing premium cost. Some policies are paying for themselves, but the drop in fixed investment returns over the past years, often mean policies that were projected to be paying for themselves may actually have elevated in premium costs to keep the policy in force.

Life insurance is also an excellent way to transfer money to the next generation if there is no spouse. A death benefit is income tax-free. The biggest challenge with finding new life insurance coverage for an older person is the premium cost and the insurability. At some point, the best cost advantage of buying new life insurance over keeping the same money in the bank is the tax-free death benefit.

As a general rule, some older people have health problems and could be turned down for life insurance by most companies. In recent years, however, some insurance companies offer a  guarantee of insurance coverage regardless of health reasons.

Many whole or permanent life policies and certain universal life policies will have enough internal cash value to actually pay the premiums. Whole or permanent life policies that also pay dividends can apply those dividends to pay the premiums as well. Some individuals have been paying on these policies their whole life in order to maximize the cash value of the policy. Very often, the policies that have been paying dividends will also be increasing in the amount of death benefit.









As a person nears the end of life, the death benefit of the policy can be more valuable for planning purposes. The cash value should be used to support the cost of the policy. Instead of taking the cash value out of the policy and surrendering it, a good whole or permanent life policy that allows cash value and/or dividends to be applied to premiums should be readjusted, reducing the premiums to the lowest level. If the policy does not allow cash value to be applied, sometimes loans against the policy can be used to pay premiums. Caution must be exercised that the loan does not get too inflated or it will deplete the policy.

It is extremely important from time to time to review the beneficiaries on all life insurance policies. If the spouse was a beneficiary and is no longer living, or there are no contingent beneficiaries, at the owner's death, the money will pass to the estate. And if the death benefit is large enough, it will be handled through probate.

As one nears the end of life, passing on the death benefit of a life insurance policy might become part of a larger planning process. Care should be taken to review all life insurance policies to make sure that the beneficiaries or the contingent beneficiaries are properly identified. With contingent beneficiaries, it is always best to specify who receives what amount and when the amount should be distributed.

As an example, the following might be a common statement written into the policy for the contingent beneficiaries: "pay all children of the deceased in equal amounts to survivors."

For aging seniors, it is extremely important to review the policies, reduce premiums where possible, and make sure the beneficiaries are updated.

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