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Marc A. Hebert's Money Sense: Life is for the living, and so is life insurance

By MARC A. HEBERT
October 13. 2017 7:05PM




Life insurance is one piece of the personal financial planning puzzle, and its purchase deserves consideration by most families. It is difficult to analyze, as the process involves what would happen if life for you stopped. But now is a good time to see how life insurance can help the family you leave behind - the living.

When thinking about the people you would leave behind, the first person that might come to mind is your spouse or life partner. Over the years, you might have incurred joint obligations that still need to be paid. Would there be enough money to cover debt, ongoing expenses and perhaps a means for your spouse to pursue a new life? Life insurance can provide the funds to do these things.

Life insurance also can provide retirement funds to replace the dollars that you didn't get the chance to save.

You might also have children to consider. Most parents work hard to help their kids achieve their hopes and dreams. Children are a responsibility from the moment they are born until they are living their own independent lives. Paying for education might be a goal. If something happened to you, is there enough money to support your children until they are on their own?

When looking at your life, your responsibility might go even further. Are you caring for an aging parent or other loved one? Would these people be able to afford health care or a place to live if you were not around? Life insurance can be a source of funds to help with these expenses.

We mentioned debt. The biggest debt most people have is their mortgage. Being a homeowner is exciting, but the mortgage you took on could last 30 years. The home also has expenses associated with it like maintenance, utility costs, homeowner's insurance and real estate taxes. Adequate insurance can pay for these expenses as well as pay off the mortgage.

Your life might be made complicated by yet another factor - do you own your own business? Life insurance can fit into your business plans in many ways. Perhaps you would like to offer coverage to your employees as part of a group plan. Insurance can be purchased to help replace the loss of talent for key employees in your company. It might also be used to help your partners or other shareholders in the company buy out your piece of the business once you are gone.

If you have policies now, you could review them for future benefits. Some policies include accelerated (living) benefits that you can access in the event of a serious or long-term illness. You might worry that your insurer could cancel your coverage should your health change. However, changes to your health will not usually affect your current insurance coverage, provided you continue to pay your premiums on time.

Life insurance also can be a way of leaving money to your heirs. It could increase the amounts you leave by more than what would otherwise be possible.

Finally, if you have a policy you no longer need, consider donating it to a charity. There are tax advantages for charitable donations made to a qualified charity. This means that both you and the charity could benefit from your donation (though some charities might not accept a gift of life insurance for various reasons). If you are interested in doing this, please explore the concept with your tax adviser or financial planner.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at mhebert@harborgroup.com. Your question and his response might appear in a future column.


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