Ed Hinerman On Life Insurance

Life Insurance For Single Mothers!

Moving on with this series of posts on all the variations on the need that women have for life insurance, whether by choice or not we have ever growing numbers of single moms.

Of all the different scenarios that women face when it comes to life insurance, perhaps that of the single mother is the trickiest. There is an obvious need. What single parent would not have some fear for their child’s future, knowing that minus them and their income, that future is really up in the air?

There are more issues here than just how much money to leave behind. Unlike a marriage or a business partnership, the life insurance benefit in this instance is for the benefit of minor children. Since no one in their right mind is going to leave a large life insurance settlement to a minor child, there has to be a plan in place.

So, let’s set the life insurance aside for a minute. What plan do you have in place for the guardianship of your children if something happens to you? Is there an ex-husband in the picture that would assume custody? Would the children go to live with a relative, say a brother of sister? Do you have a legal trust set up that will ensure that your wishes for how the money is to be used are followed, or do you trust your proposed guardian to do the right things?

I have worked with some very complicated single mom issues. Probably the toughest is the situation where the guardianship is not in question, but the trust in the guardian to manage a life insurance benefit is definitely in question.

It is fairly common that the ex-husband is the default custodian. As long as you can trust that your wishes will be carried out, making your ex-husband the beneficiary can be workable. If you have any reason to believe that the benefit to your children might be at risk because you left the money in the wrong hands, some other arrangement should be looked at.

One option is a life insurance trust. This used to be a pretty pricey document to put in place, but with the access the internet has given us to more cost effective legal remedies, it’s worth looking into. I would recommend for starters going to the Dave Ramsey website where he has a link to counselors and legal forms. Another option to put the money into trusted hands might be the leave it to a trusted relative. This is accomplished with a beneficiary designation that goes something like, Jane Smith, as custodian for funds for minor children, Joseph Jones and Samantha Jones.

Then there is the issue of life insurance. My recommendation if your children are fairly close in age is the get the maximum amount of term insurance with a term length that will take your youngest to age 22. If there is a fairly large spread in age, consider two policies and stagger the term lengths. Keep budget in mind. Make sure that whatever you do, it will weather tight financial times. Keep it affordable. You can do it.

Bottom line. The need is huge, not necessarily in money, but importance. You simply can’t leave children behind and expect someone else to have the means and know your wishes for your children.

1 comment June 16th, 2009

The Role Of Life Insurance For Women In Business!

Whether as an executive or CEO of a large business, or as owner of one of the small businesses that are the backbone of this country, women are increasingly in charge of companies and increasingly needing to consider life insurance as a way to protect that for their families or their employees.

Business life insurance has always played a key role in business continuation. We’ll discuss three ways that women can ensure that the value of their business passes in the right direction in the case of an untimely death.

In a partnership, a buy/sell policy is the best way to ensure that both partners get what they want in the event of a premature death. If a partner dies, their portion of the company is owned by their estate. This leaves two options for the surviving partner. Either buy the deceased partner’s portion from the family, or consider that the family may either sell that part of the business to a third party, or become a part of the business.

In a buy/sell arrangement both partners (or however many there are) carry life insurance, in an amount equal to their portion of the business. If the unfortunate happens, the money is instantly available to buy out the partner’s family. The alternatives outlined above, third party sale or an unknown family member entering the business, are much to unpredictable not to insure against.

In the second scenario, a sole proprietorship, the business in many cases has virtually no value to the businesswoman or her family. The value in many businesses is the income. In this case, life insurance is all about loss of income. You have a job that just happens to be owned by you. If the business doesn’t have any inherent sales value, insure to replace income. Even if the company does have some sales value, rather than the loss of income driving a fire sale mentality, life insurance can calm the waters until the best value is attained.

Third is something we don’t see often, but life insurance can make the difference in making this scenario work for your employees. There are often situations where employees, or at least a key employee could continue a business on. In the absence of a family that wants to continue the business and in a situation where a person wants to see the business survive them, a policy to buy out the family and turn over ownership of the company to the employee or employees works very well.

Bottom line. Women are more of a force in business all the time at every level. Whether simply protecting loss of income or ensuring business continuation, business life insurance is the flexible tool for the job.

Add comment June 16th, 2009