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Should life insurance be part of a Florida estate plan?

Florida residents who have families are likely aware that having life insurance is a way to help ensure that loved ones have the resources to handle the aftermath of one's death. But there are several types of life insurance, and policies can vary greatly in value. Because of this, it may not be obvious exactly how a life insurance policy fits into an estate plan.

First of all, it might be a good idea to review, on a very basic level, what life insurance is. A life insurance policy holder joins a group of people who have pooled their money in an attempt to spread the financial risk of death. Those who die first will be paid with money from those who die later. Due to this, it is, from a strictly financial perspective of course, an advantage to die early. Those in a life insurance pool who die early have contributed less in total than those who die later. Insurance companies value their policies by using tables that attempt to predict the probability of any given person dying in any given year. In this way, the company can determine how much money it needs to have over the life of the policy to pay all those holders who die.

Of course, any money one pays in premiums for life insurance is funds that cannot be used for another investment type. Just comparing the average returns of a life insurance policy and a different investment may not tell the whole story, however. There are various advantages that life insurance may have, such as less volatility, or different tax consequences, that make it more attractive than a different approach. It is important therefore, that the type and amount of life insurance one buys is considered as a piece of a larger estate plan.

Using life insurance in conjunction with estate planning tools such as wills and trusts can help give one the best possibility of having his or her wishes followed after death. Speaking to professionals in the estate planning field will aid one in determining the best steps to take in one's individual circumstances.

Source: Florida Weekly,"Your life's value - demystifying life Insurance ," Jeannette Showalter, Nov. 19, 2014

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