Ponte Vedra Beach Life Insurance News — If you are the beneficiary to a life insurance policy after someone dies, you will have to contact the insurance company to file a claim.  There is some simple paperwork involved in this process, the most important of which is the death certificate.  You will want to obtain several copies of this document, and one of them needs to be submitted to the life insurance company.  Shortly thereafter, the claim should be paid.

The insurance company can issue a check to you as the sole beneficiary, but there are other options to consider.  These other options are called “income options”; they involve smaller payments to you over time. 

When deciding how the claim payment will be made, you need to examine whether the benefits will be used to protect a family over time, provide for your own retirement, or if the money is simply needed to pay off large debts and/or taxes.

Taking a lump sum means that one single payment is made for the face value of the policy.  That money can then be used in any way that the beneficiary chooses.  If this is a large sum of money, special consideration should be given to the income potential of the long haul.  Interest earned from a large settlement over time could provide for a steady income if invested properly.

If the benefits will be used for long term then income options should be considered.  The life income option will pay a guaranteed income for a specified period, or for your entire life.  The insurance company will base the payment on your age and gender.  This type of benefit has the security of knowing that the income will always exist for the rest of your life.  This scenario is common with family members who set up a life insurance policy to protect a spouse.  A Joint and Last Survivor payment option will pay the last living person on the policy benefits until they die.

Another payment option is the Specific income provision.  In this scenario, the insurance company pays part of the benefit from the face value of the policy on a regular basis, with interest.  This form of payment may yield a higher regular payment, but the benefit will end when the money runs out.

A perpetual payment option called an Interest Income Option works well if the face value of the policy is large enough to provide adequate income from the interest alone.  This keeps the original policy investment in tact, and simply pays the interest earned from that investment to the beneficiary.  That income can then be bequeathed to another person in the event of the beneficiary’s death.  This option is the ultimate long-term plan for financial security, but it does require a significant claim payout.

A Fixed Period option can be considered as well.  In this scenario, the beneficiary can specify a time for the payout, and the insurance company will calculate what amount can be paid in principal and interest over that period.  This option would work well to support children until they reach the age that they can leave home and support themselves.

Consider payment options carefully when collecting large insurance settlements.  It is important to wring as much interest income over the appropriate time to get maximum benefit from a life insurance settlement.

One effective tool to help protect your net worth is a survivorship life insurance policy.  Without proper estate planning, a chunk of your money could go to the IRS at your death. While estate taxes may be inevitable, there are ways to conserve — or at least replace — a portion of your estate.

Survivorship Life is a great policy to have if you have significant net worth as estate taxes can be as high as 55%.    Survivorship / “Second to Die” policy’s cover you and your spouse’s lives and it is paid out on the second death.   It serves as a great estate planning tool as it can be purchased by an irrevocable trust, with your heirs as the beneficiary and the insurance proceeds are kept out of the estate for tax purposes.    The death benefit can replace a portion or all of the estate that was eaten up by paying Uncle Sam.   Survivorship life has other benefits too as it is generally less expensive than individual polies as two lives are insured.  It also has more lenient underwriting generally as two lives are insured.  It is not uncommon for a client to be denied coverage individually and then be able to qualify with their spouse for a “Second To Die” policy.

The estate tax future is up in the air and may have a shake up with this new administration.    Currently,  the exemption for 2009 is 3.5 million and the estate tax rate is 45%.  In 2010, the estate tax goes away for the year and it is unclear where it goes from there.  According to the Economic Growth and Tax Relief Reconciliation Act of 2001, in 2011 a single person will have an exemption of 1 million dollars and the amount above that will be estate taxed at a rate between 41%-55%.   Something to consider as well is if you have state death or inheritance taxes in your state.  Also, your heirs may need to pay capital gains taxes when selling inherited assets.    Talk to your advisor about your estate plan and see if survivorship life may be right for you.

1. Do you have a Group Life Insurance option? 

Many employees/consumers have access to a Group life insurance plan that allows you to obtain life insurance no matter what your health conditions are.  If you are unhealthy you might qualify or up to $250,000 of group life.  You must also keep in mind  that access for group life insurance is most likely offered through your spouse’s employee benefit plan.

 2. Convert your group life insurance certificate to an individual certificate.

Most companies have a Group life insurance plan that allows you to convert your group policy to your own individual permanent policy.  You get make this happen without going through an underwriting process.  The Life company should be looking into your current age for the premium. 

3. Buy second to die (survivorship life insurance) to get around underwriting.

Did you know that under a survivorship life insurance policy (second to die), a husband and wife are insured together and the benefit is paid only after the death of both individuals? If your spouse or significant other is healthy then you should be able have the life carrier write the policy on them.  That is a great way to offer a solution for one healthy partner.

4. Guaranteed Life Insurance is now Possible.

Many insurance carriers now offer Guaranteed issue life policies that do not require you to take a medical exam; however, these applications may ask questions at the start and you must be highly truthful or risk having your coverage voided at a later date.  Be sure to check with your insurance consultant or broker to discuss these plans in great detail.  Most carriers only offer limited amounts of coverage.  The higher end limit for face amount is close to $150,000.