Don’t forget to include life insurance in your estate plan

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

They say that the only certainties in life are death and taxes. And, while science continues to increase our average life span, it is difficult to argue with this basic precept. But, whether we are married or unmarried, whether we have a large family or no family, and whether we have millions of dollars in the bank or hundreds, we do have control over the legacy we leave behind.

Clearly a large part of our legacy is abstract and not terribly quantifiable. It involves things like the faith we have shared with family and friends, cherished memories that remain in the hearts of our loved ones, and the teachings and other words of wisdom that get passed down to our children and our children’s children.

The second aspect of one’s legacy is more quantifiable; it involves the estate, or the things that you can touch and use and spend. When we think of estate planning, this is usually what we are talking about: anything from what will happen to cherished heirlooms like Bubbe’s Seder plate, to the family home, to the cars, the retirement account balances, bank accounts and trust funds. In other words, who gets the “stuff.”

But there is yet another aspect of one’s legacy that is often overlooked. Regardless of your accumulated wealth, or lack thereof, as part of your legacy you can leave some provision for the financial support of your loved ones, or even for the continued support of your favorite charitable cause. And, one of the easiest ways to provide this is through life insurance. Life insurance is a way to provide support, to cover death expenses, to cover debts, or even to simply provide a nest egg.

You probably already know that, in the most basic sense, life insurance is a specific type of insurance that pays out a benefit upon your death. And, that benefit goes to the beneficiaries you select. But if you know little more than that you are not alone… So what do you need? Well, first, know that many employers offer some basic level of coverage as a perk of employment. At the very least you should be taking advantage of that benefit!

At the highest level, life insurance is going to be either “term,” or “permanent.” Term coverage has a set coverage period. You pay your premium, you are covered. You reach the end of the specified coverage period, you either renew your policy or let it lapse. It is either there or it is not, and there is really no in between. It has no tangible value that can be accessed while you are still living.

Permanent coverage, on the other hand, has an insurance component just like term coverage, but it also has a savings or investment component. That is, you pay your premium, and the insurance company uses part of that premium for the insurance coverage, and part of it to invest and build tangible value that you can save, or borrow against or even cash out in the future.

Permanent coverage is comprised of two major subcategories. The first is whole life insurance, which is tailored to meet longer-term goals by offering consistent premiums and a guaranteed amount of cash value. The second is universal life insurance, which provides more flexibility, even while accumulating savings.

Because there is no savings component, term life insurance is typically much cheaper to purchase than is a whole or universal life policy, making it relatively easy and cost effective to leave a bit of a legacy for your loved ones. Employer-provided life insurance is nearly always term. A permanent policy is going to cost more, but it does provide some cash value that YOU can access during your lifetime.

Confused yet? All of your options could not possibly be detailed in this space. You should talk with a good insurance agent to understand the best bets for your personal situation. Many types of policies, premium amounts and coverage are available to meet your budget and needs. But, regardless of those goals and needs, life insurance is almost always a safe and important part of any good estate plan, and is certainly one legacy that you shouldn’t forgot about.

*Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.