Five Things You Need To Know About Life Insurance Policies

1. Cash Value is Important. Many insurance policies have a cash value.? This means that in addition to the death benefit paid out after you die, the insurance company is holding some money that you can have access to during your lifetime. This cash value can be very important for planning in many situations. You should know whether your insurance policies have cash value and how much money is involved. Some companies send out statements every year. This may also be something that you cover with your financial advisor at regular meetings. If you are not getting this information from these sources, you should contact your insurance company and ask for a letter that spells it out.

2. Watch Your Policy. If you have had a policy for some time, you can become too comfortable with it. Maybe the premiums stopped at some point or you are happy with the premium amount and how it fits into your budget. However, insurance policies change over time. The financial assumptions that are part of the insurance policy can become outdated as the economy has its ups and downs and you get older. In some cases these changes can affect how much you need to pay to keep the policy going. Your premiums may need to change or you may start to lose any cash value in the policy. It is a good idea to review your policies with your insurance agent or get information from the insurance company so that you can see the projected cost of the insurance and whether your premiums or investment returns are doing their job to pay that cost.

3. Beneficiary Designations are Important. Your Will or Revocable Trust will not control how the death benefit on an insurance policy will be paid out. The beneficiary designation you have entered on the insurance companys forms is the only thing that tells the insurance company how to distribute the death benefit. For example, if your Will says that you want your young child's inheritance held in trust after you pass away, the insurance company will spoil this plan and give the death benefit directly to your child unless you clearly name the trust on the beneficiary designation. It is your responsibility to be careful and make sure that the beneficiary designations match up with your plan.

4. Beneficiary Designations can Hide from You. Knowing the importance of making your beneficiary designations coordinate with your Will, Revocable Trust or other estate planning documents is only half the battle. It is not always easy to nail down what your beneficiary designations actually say. This is usually because the insurance companies make it so quick and easy to name the beneficiaries that the paperwork is gone before you know it. Fortunately, the insurance company will gladly send you something in writing that states what is on file for your designations. You can then compare the designation with your estate plan and keep this record with your Will, Revocable Trust and other estate planning documents.

5. Good Advice is Valuable. Life Insurance is a valuable tool that can help you accomplish many different goals for you and your family. While life insurance can seem simple and straightforward, it can often take a talented and experienced advisor to keep it that way. It is good to have a relationship with a good insurance agent or a financial advisor who understands life insurance.

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