Why life insurance can be an important part of your estate plan
Do you have life insurance? It can be an important way to provide for your loved ones if something happens to you, which may also make it a critical part of your estate plan. Life insurance can help cover your outstanding mortgage, final expenses, or tax liabilities, as well as leave a legacy for your family. We’ll help you understand the potential importance of having life insurance, how to choose a policy, when you might consider purchasing a policy, and the part it could play in your overall estate plan.
Who needs an estate plan?
Estate planning is important for anyone, regardless of age or wealth. An estate plan is a series of legal documents outlining how you want your affairs managed if you’re unable to make decisions about your health, children, or finances due to illness or death. Having an estate plan can help protect your assets and give you some peace of mind.
The importance of life insurance
Having life insurance can protect your loved ones financially if something devastating happens to you. A life insurance policy can deliver a specified amount of money to your beneficiaries when they need it most, providing funds that can help replace lost income, cover funeral costs, or pay off outstanding expenses. After your death, your family will receive the policy payout after they complete the claims process, and it’s generally not subject to federal income taxes.
Life insurance policies offer financial support when a loved one passes and can provide many benefits, including a financial safety net. The payout from a policy can help supplement the income of your loved ones before and during retirement, fund children’s education, pay off a mortgage or other debts, or build an emergency fund.
How to choose a life insurance policy
Deciding which insurance policy to purchase can be complicated. There are a few factors to consider that can help you find the right policy for your situation.
• Income: If your family depends on your income, you may want to consider a policy that offers financial support to help transition financially from the loss of your income.
• Healthcare costs: Having a life insurance policy can help your family pay for unexpected medical costs that were incurred.
• Family size: Think about how many members of your family depend on you for financial support. This can affect your decisions on how much life insurance to purchase or who your beneficiaries should be.
• Business ownership: For business owners, life insurance policies are commonly used to divide business ownership after the owner’s death.
When to purchase life insurance
While you’re never too young to buy life insurance, there are certain milestones that might be a good time to evaluate your options, including:
• Starting your first job: Many employers offer life insurance as an employee benefit. This is a good start, but you may want to consider an additional policy that’s not tied to your employer.
• Getting married: You and your future spouse should discuss potential loss of income needs.
• Starting a family: Consider how much your family relies on your income and look for a policy that can potentially help take financial care of your family.
• Buying a home: Having sufficient life insurance to pay off the mortgage on your home can offer you peace of mind for your family’s future.
Protecting your loved ones
No matter your age or stage of life, creating an estate plan is critical to helping secure your family’s financial future in the event of your death. Take the time now to figure out how much your family would need if your income were no longer available and consider whether purchasing life insurance as part of your overall estate plan makes sense for you. As you pass key milestones in your life, take a look at both your life insurance policy and estate plan to be sure they continue to match up with your family’s needs.
Important disclosures
Insurance policies and/or associated riders and features may not be available in all states.
Life insurance death benefit proceeds are generally excludable from the beneficiary’s gross income for income tax purposes. There are a few exceptions such as when a life insurance policy has been transferred for valuable consideration. Comments on taxation are based on John Hancock’s understanding of current tax law, which is subject to change. No legal, tax or accounting advice can be given by John Hancock, its agents, employees or licensed agents. Prospective purchasers should consult their tax professional for details.
Loans and withdrawals will reduce the death benefit and the cash surrender value and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Withdrawals in excess of the cost basis (premiums paid) will be subject to tax and certain withdrawals within the first 15 years may be subject to recapture tax. Additionally, policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59 1/2. Withdrawals are available after the first policy year.
Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595.
This content is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made.
MGR0818233046250
