Providing Peace Of Mind
For You And Your Family

The role of life insurance in a comprehensive estate plan

On Behalf of | Jan 29, 2025 | Estate Planning |

Many people invest in life insurance without establishing estate plans. There are also plenty of people who plan their estates without acquiring life insurance. These two forms of personal protection tend to dovetail nicely with one another.

Technically, life insurance generally is not part of an estate. The person purchasing the policy names a specific beneficiary, and the insurance proceeds do not have to pass through probate court. Estate planning documents do not determine who receives life insurance proceeds. The beneficiary designations filed with the insurance company determine that. Still, people putting together an estate plan may want to review their life insurance as part of that process.

How does life insurance help with an estate plan?

People secure life insurance to replace their income for their families if they die and to cover predictable expenses. Therefore, life insurance can be an important element of estate planning.

Individuals can estimate their funeral and burial costs to ensure that their life insurance can cover those expenses. Additionally, people may want to consider their personal financial obligations. Student loans, in particular, can consume a significant portion of an individual’s property when they die. By carrying enough life insurance to pay off student loans, mortgages and other financial obligations, people can help their loved ones cover predictable expenses.

Using life insurance to cover known costs and replace lost wages can be a smart move for those who want to ensure the financial stability of their loved ones. Those establishing or updating comprehensive estate plans often want to review their life insurance policies at the same time. This effort can help them to ensure that they have enough coverage and that they’ve named the right party as the beneficiary of the policy.