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Ten Life Insurance Purchasing Guidelines

Malvern Insurance Associates, LLC

Life insurance, because of its long shelf life, can become outdated. What seemed appropriate when purchased may no longer meet your needs today.

Your financial advisor or life agent can help you navigate the nuances and decisions to be made when purchasing and updating coverage.

Below are guidelines describing typical insurance pitfalls to be aware of. These are guidelines, and a full review by your advisor is recommended prior to making any changes.

  1. Your estate should not typically be named beneficiary of your policy. This will avoid:
    1. Inheritance and death taxes, which many states have
    2. Delays and the expense of probate
    3. Full access to proceeds by creditors
  2. Two or more contingent beneficiaries should be named.
  3. At least every three years, a written confirmation of the status of policies and beneficiaries should be requested from your insurer.
  4. The insurance product should match the problem. Be sure you have the right policy for your needs.
  5. Verify there’s adequate life insurance to provide food, clothing and shelter, and to pay off debts. This will ensure that those you love can continue in their present way of life.
  6. Remember that term insurance will expire and insurance becomes more expensive to purchase as you grow older.
  7. Don’t designate minors as outright beneficiaries. Consider instead, creating a trust for them until they reach adulthood.
  8. Consider an ownership transfer of life insurance to others to save federal estate taxes.
  9. Check to see if your business can provide your family with insurance more cost effectively.
  10. Don’t buy life insurance as though it were a commodity. Consult with your financial advisor, as their knowledge of the marketplace and commitment to service can make a difference as to how cost effective life insurance can be.

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