Life Insurance and Estate Planning

Life insurance is available in many forms. There are pros and cons to each type of policy, and this flexibility makes it an ideal form of estate planning. Among the different types and uses of life insurance are:

1. Term life insurance is a policy for a short period of time, generally 5 to 10 years. This form of insurance offers a low monthly premium but does not accumulate a cash value, although the premiums increase each year.
2. Whole lifeinsurancepolicies provide a death benefit for the entire life of the insured, and allow you to accumulate a cash value over time that you can borrow against. The premiums are initially higher than those for term insurance, but they are comparable as the insured ages.
3. Survivorship life insurance policies insure two lives, often a husband and wife. Benefits are paid to the beneficiaries only after both insured persons die. The premiums are usually lower than a life insurance policy for a single-insured, and can be variable, universal or whole life insurance.
4. Universal life insurance has flexible premiums, an adjustable death benefit, and accumulates a cash value. Although the accumulation value fluctuates over time, this type of policy offers tax advantages for the beneficiaries.
5. Variable life insurance policies accumulate cash value, but they are much riskier. The policyholder invests the cash value into an account of their choice, but takes the risks the market brings.

It is best to discuss your estate planning goals with a licensed attorney to determine which policy will best meet your needs to establish a plan for your beneficiaries.