The Role of Insurance as an Estate Planning Tool

THE ROLE OF INSURANCE AS AN ESTATE PLANNING TOOL

Among the biggest estate planning mistakes we can make is overlooking what a final illness can do to our net worth…and what it can mean to our heirs. It can be devastating! But a lot of potential damage can be avoided by using insurance as an estate planning tool.

One tragic scenario: Howard and Beth spent a lifetime working, raising a family and building their estate. By retirement, they had a net worth of several hundred thousand dollars. Between this and Social Security, they lived comfortably. Their plan was to enjoy their golden years and, someday, leave a tidy nest egg for their children and grandchildren.

Then Howard developed a debilitating illness. The medical bills piled up, and Medicare covered much of them, though certainly not all. They cut corners as Beth became a full-time caregiver. But as Howard's condition deteriorated, the task became too great for Beth. She had no alternative but to put Howard in a nursing home.

By the time of Howard's death nearly three years later, the couple's finances had been devastated. Were it not for assistance from her children, who themselves were facing the challenges of raising their own families, Beth would have been left in poverty. At her death several years later, there was nothing remaining for her family to inherit except a few family heirlooms.

The real danger: This scenario could have been different. While we cannot predict what events will befall us, we can nonetheless prepare for their possibility.

We can help protect our loved ones by recognizing the important role insurance can play in our estate planning. For example:

We can maintain adequate Medicare supplement insurance. According to statistics published by the Department of Health and Human Services, 45% of an individual's lifetime medical expenses are incurred during a final illness. Medicare picks up 80% of covered expenses. However, there are limits, as well as services that are not covered. A quality policy can reduce out-of-pocket costs significantly. Plus, it can assure that medical decisions are based on the best interests of the patient, not affordability.
We can maintain adequate long term care insurance. According to the Health Insurance Association of America, as many as four in ten men and women who reach age 65 will be confined to a nursing home at some time in their lives. Except for skilled care, Medicare does not cover nursing home stays, the cost of which can run between $36,000 and $80,000 a year, reports the National Center for Health Statistics. Fortunately, today's long-term care policies can help control these costs and protect the family's financial security. Also, many policies offer home health care provisions, which help relieve the financial burden of caring for a loved one.
We can maintain adequate life insurance. Life insurance serves two important purposes: It can save an estate, and it can create an estate. This product is designed so that, at the very moment it is needed most, a designated amount of money will be paid to the beneficiaries. This money can be used to pay off final expenses, guarantee income for a surviving spouse or provide an estate to pass on to heirs.

Insurance can play a key role in your estate planning. Most of all, it can help guarantee that the plans you make will not be undone by a final illness or other unexpected occurrence. See your insurance agent for more information.