One in three people die without leaving a will, usually in the mistaken belief that things will ‘sort themselves out’ if the unthinkable happened– especially if their lives appear to be fairly straightforward; maybe they have a spouse, kids and a house for example. However a recent case in the UK showed that this is definitely not necessarily the case, should you die intestate and without any significant life insurance.

Family left in Financial Difficulty when Husband died leaving no will or Life Insurance

Mandy Tenant a mom of three, found this out the hard way. Her husband Adam died suddenly without a will and had not taken out life insurance. With regard to strict intestate laws in Britain the estate was divided up between Mandy and her three young children, much being tied up in a trust fund for her kids. This meant that Mrs. Tenant was left financially insecure with no way to pay the mortgage, leaving the family in danger of losing their family home.

Mom told – if you want to keep your house then you will have to ‘Sue’ your children
On seeking legal advice she was told, by law firm Irwin Mitchell that the only way forward would be to sue her own children to gain control of the assets.  A representative at Irwin Mitchell said “This whole situation could have been avoided with a valid will leaving his wife in control of the whole estate”. Plus, If Mr. Tenant had taken out proper life insurance cover this would have allowed his wife to pay off the mortgage, on his death. Without either a will or life cover Mrs. Tenant, came to realize that, in this unfortunate situation, intestacy does not recognize partners.

Intestacy Laws do not always make sense

Intestacy laws in the US vary from state to state – in Alberta for instance, which gives unmarried couples the same rights as married, a surviving spouse may learn that she or he is entitled to no part of the deceased husband/wife’s estate. In fact it could happen that the entire estate has been given over to an ‘ex’ partner in preference to the existing spouse or even the deceased person’s children and parents.

Protect your Loved Ones by Taking out Life Insurance

As well as taking out a will – a necessary if unpalatable chore – the importance of making sure you have enough life cover is essential. By taking out enough life insurance to cover the cost of your mortgage you can at least rest assured that, whatever else happens, your family will not end up losing not only you but their family home.

 photo credit: smemon87

Source Telegraph.co.uk ‘No will? You’ll have to sue your children’ 13 August 2010

There are basically two types of life insurance policy available known as ‘whole life’ and ‘term’. Whole life policies are there to provide benefits to the owners throughout their entire lives, whereas ‘term’ policies are taken out to provide coverage for a set period of years.

Life insurance needs should be re-assessed at regular intervals to ensure the policy or policies taken out are still adequate for their purpose. Policies taken out 10 -15 years ago may have outlived their use, lapsed, or premiums may have gone up due to underperformance in a volatile market place. Examples of underperformers include many of the ‘permanent’ life policies available over recent years –‘whole life’, ‘universal’ and ‘variable’ life policies which are linked to interest rates, which can go up as well as down.

No ‘One size fits all’ Life Insurance Policy

There is no ‘one size fits all’ insurance policy out there and it may be a case of combining different types of life coverage in order to ensure future financial needs will be met. Many people decide to re-assess their requirements for life insurance after experiencing a big life change which affects their finances – such as having a baby, or taking out a mortgage. The implication of leaving behind dependents or partners who may be left with big financial commitments motivates many to plan a financial future which includes life cover.

As well as meeting the needs of their beneficiaries in their ongoing lives, another common reason to take out coverage could be simply to cover short term funeral costs (costs which are rising every year).

How to calculate life insurance requirements

An appraisal is needed as to how any current policies are performing, and an honest calculation of their projected value going forward is needed. You may find that there are better products out there in the marketplace to suit you. Restructuring may seem like a hassle, but lower administrative fees and the fact that insurance companies have re-designed their cost structures mean that changing policies is not the financial headache it used to be.

Alternatively – you may discover through the process of re-evaluation that your life coverage is just fine, thank you – but taking stock of finances in an uncertain economic climate has to be a good thing.

Source: Stephen Smith, Delmarvanow.com

 photo credit: SMJJP

For most of us our home is the single largest investment we will ever have which is why we need a safety net for our partners and children who also depend on this investment. Mortgage life insurance is a life insurance policy which is designed to pay off the balance of the mortgage should the policy-holder die before the loan is paid off.

However recent figures from a survey undertaken by Sainsbury’s Life Insurance reveal that in the UK millions of borrowers (with billions of dollars worth of home loan debt between them) have failed to take out mortgage protection. In fact a staggering 43% of British mortgagees have no life cover. The recent recession has meant that UK borrowers, struggling to keep up with mounting debts, have cut back on life insurance cover.

A recent survey has shown that nearly a third of 35 to 44 year olds have no life insurance cover protecting their mortgage payments, and 34% of 45 to 54 year olds are in a similar situation. This means that many people with children are unprotected, as well as younger mortgage holders.

According to Lucy Hunter, at Sainsbury’s Life Insurance ‘Life insurance provides financial cover should the unthinkable happen, enabling people to be secure in the knowledge that their dependents could receive a cash lump sum if they were to die.”

This is particularly important for home owners who need to have the reassurance that, should the unthinkable happen, their families would be covered and able to continue living in the family home without the burden of financial responsibility – life insurance is basically ensuring financial security for the future.

Source: The Insurance Blogger.com November 2010.

photo credit: fourbyfourblazer

Business owners have different needs when it comes to taking out life insurance which differs from individuals who are employed. Life insurance is there to help look after loved ones, should the unthinkable happen. But if you own a business and die unexpectedly then you need a life insurance plan which will not only keep your family provided with an income, but also to ensure that the business can continue as usual.

Which Type of Life Insurance Would Best Suit you as a Business Owner?

When taking out life insurance as a business owner there are some things which should be considered such as whether to take out term or permanent insurance. Term life insurance is a relatively simple idea – you decide on the level of cash payment which would be paid out upon the event of your death, and also on the term of the coverage e.g. $400,000 over 25 years. This can be a good way of making sure a mortgage balance would be repaid for instance.

This might also be a good type of life insurance for a business owner with a partner who is planning on retiring at a fixed date. For a couple running a business together they could agree that if either one dies before their planned retirement date, the partner left behind would be able to purchase their deceased partner’s share in the company. Term policies could be taken out making either partner the beneficiary.

This could be a good option to cover the business – but the problem with term insurance is that once the qualifying period runs out – say, after 20 years, then the company would no longer be covered. And, as the business gets older, so do the owners, which means taking out term insurance later on will be more costly. When term insurance ends without the policy owner having died, there will be no cash payment.

Would Permanent Life Insurance be a Better Option for Business Owners?

Permanent life insurance policies include both insurance as well as some investment, or ‘cash value’. The premiums pay, not only for your life insurance coverage, but some is used for investment purposes. The upside of this is that – when the term of the insurance ends, you will still have the investment element to call upon. Plus, permanent life insurance continues for the whole of a person’s life – and so may be more attractive to those wanting coverage for longer.

Plus an additional benefit to a business owner is that the investment component of the policy can be borrowed against and used to further the company – or the policy owner can use the funds to repay premiums.

Life Insurance for Key Employees

Life insurance can also be taken out by business owners on key employees to cover them in the event of their death – should that employee die the insurance would cover them for the loss of income entailed and help fund them in finding a replacement.

Life insurance for a business is often in place for buying out the remaining partners in the event of the premature death of one of the owners. The insurance can cover all the key members of the business. Before deciding which type of insurance to buy – business owners should get in touch with a financial advisor who can help identify the pros and cons of the various life insurance policies on offer.

Source: Karin Price Muewller at Entrepreneur.com

photo credit: Greg317

In the knowledge that their children may never be able to live an independent life after they have died, parents of children with special needs have to make extra provisions for their children’s future.

A recent study by Cornell University revealed that there are 2.6 million or more children aged five to 15 with one disability, with more than 30% of them having at least two disabilities.  Another recent study, by Hartford, questioned 580 parents with special needs children and found that 23% of them spend over $500 per month on addressing their care.

60% of parents said that they believed their children would continue to need financial help into adulthood – but only half the parents said they had a plan in place to cover this cost. The 42% who felt confident they had planned for their children’s financial futures had mostly used life insurance as a tool to do so.

Parents of Disabled Children Unaware of Federal Laws regarding Inheritance

Many parents of children with special needs plan to leave their money to their children on their deaths – with 58% of them in the study planning to name their children as beneficiaries. However many are unaware that doing so could bar their children from receiving essential state services and benefits.

Parents of Special Needs Children have to Plan carefully when it comes to Life Insurance

Under Federal Law an inheritance of over $2000 can bar someone from receiving state assistance. SSI (State Security Income) can be withdrawn altogether for a special needs child, if they have received an inheritance – and this includes life insurance benefits.

A Special Needs Trust is an Option

A ‘Special Needs Trust’ can supply children with financial help towards their care, and will not disqualify them from receiving help and support from the government. The trust is the legal owner of financial assets such as stocks and savings and also manages any benefits or properties which ensue from a life insurance policy. The trustee is barred from profiting from the assets, but is charged with investing or dispersing them.

However according to the recent survey, just a quarter of parents have taken the step of setting up a ‘special needs trust’.

Parents need to become more Educated how to use Life Insurance

Donna Scalaro, a Director at The Hartford believes parents of special needs children need to become more informed about these ways of managing their children’s future finances. “Most parents think they cannot devote extra savings to a trust, because they feel they have to amass this large amount of savings to cover expenses.””They do not realize they can cover the expenses by using life insurance. Using dollars from life insurance can be a very affordable strategy.”

Due to the way the trusts are set up, the children with special needs to not ‘own’ the money in the trusts and therefore it cannot be viewed as income. This is why they will still be considered eligible for government aid to help with such things as food, housing, utilities, property taxes, and cash.

But the trusts can help pay for important expenses for their care such as disability aides, transportation, computers, and rehabilitative treatment.

The most important thing is that parents should always seek help from a financial advisor who can supply them with specialist help in this area. Only when they are fully armed with legal information and financial options open to them, can they come up with the best way to safeguard their children’s future.

Source: Insure.com – Life Insurance Planning for Parents of Children with Special Needs, June 2010
photo credit: Beverly & Pack