One of the problems many people have in their estate planning, is providing a way to get needed cash to family members. This can be the result of creating wills that will take a long time to get through probate. It can also be the result of not having that many assets in the first place, which can be a problem for parents with young children to support.
Life insurance is a possible solution that can solve both these problems. However, mistakes are often made, as Wealth Management discusses in "Eight Life Insurance Mistakes Clients Make."
Common mistakes include:
- Not buying life insurance at all, when people have good reason to do so.
- Buying too little coverage to meet the expected needs of minor children.
- Many people purchase the wrong type of coverage for what they need.
- Just getting life insurance from their current employer's benefit plan, instead of shopping around and then leaving jobs and losing coverage.
- Not purchasing any coverage for stay at home parents, since the breadwinner will need to take more time off work, should anything happen to the other spouse.
- Purchasing a policy that only offers coverage until children reach the age of 21, instead of funds for college and when getting started in their careers.
- Not creating a trust to handle any payouts, after a child reaches the age of 18, especially when the child is still too young to manage it.
- Canceling a policy as soon as possible, before making sure the child will not need it, if something happens to the parent.
Reference: Wealth Management (May 25, 2018) "Eight Life Insurance Mistakes Clients Make."