For those of us who can’t predict the future, it can be difficult to help a client choose a life insurance policy to suit their lifestyle. The difficulty comes in knowing what resources one’s spouse and family might need in order to maintain their current lifestyle in the unfortunate event of an unforeseen tragedy. To many people, sums such as a quarter million dollars can sound significant, but most families will find that such an amount won’t get them very far. The amount becomes even less when you factor in debts such as home mortgages, student loans and credit card payments.
Failure to extend a policy to incorporate all of these costs could cause a family to have to forfeit their home in order to keep up with funeral expenses, unpaid taxes and day-to-day expenditures, especially in cases where the passing results in the loss of a second income. And with state colleges charging between $30,000 and $40,000 annually, it is also important to consider how a life insurance policy might affect a child’s future.
As an estate planning professional, it is important that you be able to work with your clients to help them select policies that adequately protect their needs. Estate planning attorneys can offer assistance by asking the right questions about their clients’ lifestyle habits. A lawyer should remember to thoroughly investigate clients’ spending and savings habits by inquiring about income sources, retirement and savings accounts, personal debts and any liabilities.
A recent article in Westaways, which shocked me, suggested that a middle-income family with two children should hold more than $2.2 million in coverage between two working adults to support the family in the event of an unexpected passing. If your client’s policy is less than that, it is important to encourage them to evaluate the true costs of their lifestyle to make sure that their loved ones won’t find themselves enduring unnecessary hardships due to policy limitations. In many cases, the cost to expand an existing policy may not be as expensive as one might think. This seems to be something that is worthwhile to investigate.
The entire area of insurance is another issue many families may not be addressing on a timely basis. Therefore, be sure to help your clients by inquiring about their lifestyle, income needs, and insurance.
Sanford M. Fisch
CEO & Co-Founder
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555