None of us want to think about being unable to care for ourselves or handle our own affairs. But it’s a real possibility that time may come. It’s important to plan appropriately: lifestyle planning, financial planning, and life insurance planning.

Considering that most people spend more on medical expenses in their last year of life than in the rest of the years combined, the death benefit from a life insurance policy will be a great relief to a surviving partner or children to pay off accumulated debts or provide for final expenses. It can also leave a legacy to a loved one or an organization that’s near and dear.

The last thing we want is a lapse in life insurance coverage because of a missed premium or some other complication simply because we’ve become unable to monitor our own policy. So what are the steps we can take in advance to prevent that?

Step 1: Second person notification.

In many states, insureds over age 65 are automatically given the option to elect a second person to be notified of a missed premium or a policy about to lapse. This is a simple way to prevent losing this valuable protection. This second person should be someone who is relatively stable (meaning their address will be the same for a long time) like a fee-only financial advisor, CPA, or younger sibling. Children are, of course, a great option but children are more likely to move to a larger house or relocate for a job than a retired sibling.

Step 2: Establish a power of attorney.

This will give children or guardians access to the life insurance policy and allow them to work with the insurance company to take loans, make premium payments, and check on the overall health of the policy.

Step 3: Review beneficiary designations.

This is simply making sure the beneficiary(ies) stated in the policy at time of issue is still the beneficiary(ies) who should receive the death benefit today. Has there been a marriage? A divorce? A child? It’s a good rule of thumb to have both a primary beneficiary(ies) and a contingent beneficiary, in case the primary beneficiary(ies) pre-deceases the insured.

Step 4: Review owner designation.

Confirm that the owner of the policy is correct and appoint a contingent owner if the primary owner is:

• someone other than the insured, or
• a trust

If the owner and/or beneficiary is a trust, it’s a good idea to submit a copy of the trust documents to the insurance company now to eliminate aggravation when claim time comes.

Step 5: Review the policy for any accelerated death benefit riders.

A terminal illness rider, specified illness rider, or chronic illness rider can allow access to policy benefits while living to help meet end-of-life financial needs.

Step 6: Request an in-force illustration.

This will facilitate a policy “check-up” to determine how it’s expected to perform going forward under certain assumptions. It may even be possible to stop premium payments if the cash values can sustain the policy in the short term, freeing up funds to more easily provide care and support for present needs.

Our Policyholder Services team can help your clients with these steps. Please contact Neva Clark, Policyholder Services Supervisor, for assistance.