Can Personal Insurance Protect My Family? - Skyleigh McCallum (2024)

FAQs

Can beneficiaries of life insurance policies only be family members or those directly affected by a person's death? ›

A life insurance beneficiary is the person or entity you designate to receive your policy's death benefit when you pass away. You can choose to have one or multiple beneficiaries, and they can be family members, charitable organizations, legal entities — it's your decision.

Term life insurance

It is sometimes called “pure life insurance” because, unlike whole life insurance, there's no cash value to the policy. It's designed solely to give your beneficiaries a payout if you die during the term. Most individual term policies have level premiums, so you pay the same amount every month.

While there are many whole life insurance benefits, there are some drawbacks—like higher premiums (compared to term life insurance), lack of flexibility, slower growth and potential penalties.

The amount of insurance needed varies greatly from person to person, and is dependent on a number of factors. These may include one's lifestyle, family requirements, health status, financial obligations, as well as personal risk tolerance.

Avoid Directly Naming Those Reliant on Public Assistance

If certain heirs rely upon needs-based public benefits, naming them as beneficiaries on assets could cause them to lose the support they need. Government programs like Medicaid, SSI, and housing assistance impose strict income and asset limits.

A will cannot override a beneficiary designation because the policy is a contract between the person who purchases it and the issuer. The only way anyone can override a beneficiary other than the policyholder is if a court determines there's a conflict between named beneficiaries and state laws.

How long does it take to borrow against life insurance? It often takes five to 10 years to accumulate enough cash value to borrow against your life insurance policy. The exact length of time depends on the structure of your policy, including your premiums and rate of return.

You will typically find it listed separately in your life insurance statements. The net cash value will generally be lower than your total accumulated cash value for the first several years of coverage, as it's reduced by fees and surrender charges.

The good news is that you likely won't need to worry about having a claim denied if you're truthful with your life insurance company from the start. Instances of lying, criminal activity, or dangerous behavior that's not disclosed upfront could all be reasons life insurance won't pay out.

For every $100 you invest in whole life insurance, the first $5 goes to purchasing the insurance itself; the other $95 goes to the cash value buildup from your investment, Ramsey says. But for about the first three years, your money goes to fees alone. Someone is making out, and it's not your beneficiary.

What is the biggest weakness of whole life insurance? ›

Cons of Whole Life Insurance

Whole life is more expensive than term life, and you will receive a lower death benefit than you could get with the same amount of money with a term policy.

A financial advisor who makes a living through commissions has a strong financial incentive to include life insurance, as some insurance companies pay rather well for selling their products.

Your right to appeal

Internal appeal: If your claim is denied or your health insurance coverage canceled, you have the right to an internal appeal. You may ask your insurance company to conduct a full and fair review of its decision. If the case is urgent, your insurance company must speed up this process.

Your monthly premium will reflect the added risk of multiple drivers using one vehicle — so you'll most likely pay more than you would for a single-driver policy. However, a multiple-driver policy is usually cheaper than purchasing two individual auto insurance policies.

Yes, multiple drivers can share a car insurance policy under certain conditions. With most auto insurance companies, you are required to list all household members, including spouses and children, on your policy if they have a valid driver's license and access to your vehicle.

Can anyone be named as a beneficiary? Your beneficiary can be a person, a charity, a trust, or your estate. Almost any person can be named as a beneficiary, although your state of residence or the provider of your benefits may restrict who you can name as a beneficiary.

While married people typically choose to name each other as their insurance beneficiaries, single people can choose to name anyone who is either related to them or who might depend on them financially. You may also be able to name a partner or good friend to whom you're not married.

Whatever you do, don't name the child as the beneficiary—the law prohibits anyone from receiving a life insurance payout if they aren't the age of majority (which could be 18 or 21 depending on your state). Consult with an attorney if you have a disabled or special needs child.

Designate a family member or friend.

However, there are a couple of restrictions you should consider. If you're married and live in a community property state, the law usually requires your spouse to be a life insurance beneficiary.