I’ve had the honor of being featured as an expert by MoneyGeek. In this Q&A session, I provided expert answers to questions on the worth and utility of life insurance, drawing from my extensive experience in financial planning. You can find the full article from MoneyGeek here.
Experts’ Tips on the Worth of Life Insurance
Marcus P. Miller, CFP®, MBA
What’s the most important factor individuals should consider when determining if life insurance is worth it?
The most important factor individuals should consider is the needs of their dependents. Factors such as age, income, debt and number of dependents should all be taken into account. Additionally, individuals should carefully consider their long-term financial obligations, such as providing for their children’s education or ensuring financial stability for a surviving spouse.
How can individuals leverage life insurance to enhance their estate planning objectives?
Life insurance can be a valuable tool in estate planning, as it can provide liquidity to cover estate taxes, outstanding debts and other financial obligations. This can help ensure that assets are not depleted to cover these expenses, allowing beneficiaries to receive their intended inheritance. By naming specific beneficiaries in their insurance policies, individuals can also bypass the probate process, streamlining the transfer of assets to loved ones.
Note that many life insurance salespeople use the estate planning angle to sell large life insurance policies. Estate taxes do not start until $12–24 million in net worth, which is typically when these policies become attractive from an estate planning perspective.
What are some of the limitations of life insurance, and how can one navigate around these issues?
Some limitations of life insurance include the cost of premiums, underwriting requirements and potential limitations of policy provisions. To navigate around these issues, individuals can carefully assess their need for coverage and consider term life insurance as a more affordable option for specific time-bound needs. It’s also crucial to compare policy options from different insurance providers to ensure competitive rates and favorable policy provisions.
