If you've been a reader of this blog, then you know that estate planning has many elements. Most people realize that wills and trusts make up a significant portion of an estate plan, but they are not by any means the documents that are needed in order to ensure that a plan is holistic in nature. Powers of attorney, for example, can play a crucial role by ensuring that one's financial and healthcare decisions are protected in the event that he or she becomes incapacitated.
Life insurance can also be an important consideration when creating your estate plan. In its most basic terms, a life insurance policy is a contract between an insurance company and a policy holder. The insurance company guarantees payment upon the policy holder's death in exchange for the payment of a monthly premium during the policy holder's lifetime. The reason people seek out life insurance is to ensure that their loved one's have financial resources when the policy holder passes away.
There are many different types of life insurance, so it is critical that individuals carefully consider their loved one's financial situations before settling on a particular type of policy. It is worth noting, though, that there are three main components of a life insurance policy. The death benefit is the money that is paid out upon the policy holder's death. Then there is the monthly premium amount. The third component is the cash value of the policy. This is only available to some types of insurance policies and acts as a sort of savings account that can be claimed later.
Life insurance is just one of the many elements that must be considered when developing your estate plan. It's not right for everyone, which is why it is crucial to think about what kind of arrangements are best for you and your loved ones. If you would like assistance figuring out how to create an estate plan that fits your needs, consider discussing the matter with an estate planning attorney of your choosing.