They say the only certainties in life are death and taxes. While science continues to increase our average life span, it is difficult to argue with this basic precept. But, whether we are married or unmarried, whether we have a large family or no family, and whether we have millions of dollars in the bank or hundreds, we do have control over our legacies.
Clearly a large part of our legacy is abstract and not terribly quantifiable. It involves things like the faith we have shared with family and friends, memories that remain in the hearts of our loved ones, and the teachings and other words of wisdom passed down to our children and our children’s children.
The second aspect of one’s legacy is more quantifiable. It involves the estate, the things that you can touch and use and spend. When we think of estate planning, this is usually what we are talking about: anything from what will happen to cherished heirlooms like Baba’s Seder plate, to the family home, to the cars, the retirement account balances, bank accounts and trust funds. In other words, who gets the “stuff.”
But there is yet another aspect of one’s legacy that is often overlooked. Regardless of your accumulated wealth, or lack thereof, as part of your legacy you can leave some provision for the financial support of your loved ones, or even for the continued support of your favorite charitable cause. One of the easiest ways to do this is through life insurance. Life insurance is a way to provide support, cover death expenses and debts, and provide a nest egg.
You probably know that, in the most basic sense, life insurance is a specific type of insurance that pays out a benefit upon your death, a benefit that goes to beneficiaries you select. If that’s all you know, you are not alone. So what do you need? Well, first, know that many employers offer some basic level of coverage as a perk of employment. At the very least you should be taking advantage of that benefit!
At the highest level, life insurance is going to be either term or permanent. Term coverage has a set coverage period. You pay your premium, you are covered. You reach the end of the specified coverage period, you either renew your policy or let it lapse. It is either there or it is not, and there is really no in-between. It has no tangible value that can be accessed while you are still living.
Permanent coverage, on the other hand, has an insurance component just like term coverage, but it also has a savings or investment component. That is, you pay your premium, and the insurance company uses part of that premium for the insurance coverage, and part of it to invest and build tangible value that you can save, borrow against or even cash out.
Permanent coverage consists of two major subcategories. The first is whole life insurance, which is tailored to meet longer-term goals by offering consistent premiums and a guaranteed amount of cash value. The second is universal life insurance, which provides more flexibility, even while accumulating savings.
Because there is no savings component, term life insurance is typically much cheaper to purchase than a whole or universal life policy, making it relatively easy and cost-effective to leave a bit of a legacy for your loved ones. Employer-provided life insurance is nearly always term. A permanent policy is going to cost more, but it does provide some cash value that you can access during your lifetime.
Confused yet? It is impossible to detail all of your options in a short article, and you should talk with a good insurance agent to understand the best bets for your personal situation. Many, many types of policies/premium amounts/coverage are available for you to consider to meet your budget and needs. Regardless of those goals and needs, life insurance is almost always a safe and important part of any good estate plan, and is certainly one legacy that you shouldn’t forget about.
Andrew Zashin is co-managing partner of Zashin & Rich, Co. L.P.A. and an adjunct professor of law at Case Western Reserve University School of Law. His blog is www.zrfamilylawblog.com and he can be reached at www.zrlaw.com.