How do you ensure that your life insurance policy will benefit your heirs? Not long ago, 11 major life insurance companies agreed to pay $763 million to the heirs of deceased policyholders after it was discovered the companies continued billing customers for their policies even after they were dead.
Insurance companies had previously agreed to provide restitution and do a much better job of locating beneficiaries after being sued by the attorneys general of several states for not paying out benefits to the heirs of deceased policyholders.
This pattern seems to indicate that we all need to do a better job to ensure that the life insurance benefits we pay out come back to our heirs in the way we intend Here are 5 tips for making sure your heirs benefit from your life insurance benefits:
Be truthful in your application.
If you have not been completely forthcoming about a major medical issue or your health habits (smoking, drinking, etc.) in your application for a life insurance policy, that policy could be declared null and void and your heirs would be out of luck.
Don’t let it lapse.
If your family is counting on life insurance benefits to pay the bills if something should happen to you, and you have not been paying the bills for the policy, your family is left unprotected.
Have a beneficiary bench.
Having a beneficiary on your policy who dies before you do is a recipe for disaster – and it happens much more than you think. Designate a secondary as well as a final beneficiary for your life insurance benefits, and update them as the need arises. We recommend naming your trust as the beneficiary of your life insurance benefits, rather than naming an individual or even series of individuals.
Play it safe.
If you die because you engaged in risky behavior (not covered by the policy) – or you take your own life – your heirs will likely receive back only what you paid in premiums, and not the full value of your policy.
Talk about it.
The primary reason that a vast majority of potential beneficiaries never see a dime in life insurance benefits is because policies were lost or misplaced and family members were never told of their existence in the first place. So if you have a life insurance policy, let your family know. And ask them if they have one, too.
We prepare a Family Wealth Inventory for all of our clients. Give us a call at 931.363.7222 to set your appointment time with Pierchoski Estate Law.
A Note from the Attorney, Stan Pierchoski:
The practice of law is a second career for me. After obtaining Master of Science degrees in both Nuclear and Mechanical Engineering, I worked in the Nuclear Power Industry for 15 years. Always having an interest in law, I attended and graduated from law school and founded the Pierchoski Law Firm in 2002 in Pulaski, TN. For several years I practiced as a criminal defense, trial attorney. After my parents passed I became interested in Trust and Estate Law and felt a strong calling to change my practice to the Estate Planning area.
For years I have been exclusively doing trust writing and wealth planning and have become proficient at it. Over the last several years my practice has evolved to serve all age groups including elders and Medicaid Planning. I am always open to your questions and am more than happy to chat with you about your concerns so give me a call or stop by my office. You’ll be glad you did!