how does life insurance work

[Elmira Nancy]

Life insurance is insurance on your life. If you die the insurance company pays money to your beneficiaries. they could be family, friends, the company you work for even a charitable organization. as long as there is an insurable interest.

If you are dead the money from the insurance can pay for your funeral, your debts, mortgage, medical bills, car payments, children's college education, your families survival if you are no longer here to provide for them, as well as pay for inheritance taxes, probate taxes (life insurance is tax free).

[camrye1]

i have a question on what I would need to do to name the beneficiary of my life insurance plan. When my wife and I were married we locked in our life insurance rate for upwards of 30 years or so. We have 250k on each of us. In the event that something was to happen to both of us, we named our parents as the beneficiaries. Since then we have had two kids and want the money to go to them. I have talked to my brother about taking the kids and becoming thier gaurdians in such an instance and was wandering how we would need to set it up so that my brother would be able to receive some of the money in order to take care of our kids, but I would also want a good majority set up for my children to have once they reach a certain age, and once their college is paid for out of it. I want things in the trust to say that the child must graduate from college as well before they can collect the money. If anyone has any ideas please let me know. Thanks

[pochax]

i have a question on what I would need to do to name the beneficiary of my life insurance plan. When my wife and I were married we locked in our life insurance rate for upwards of 30 years or so. We have 250k on each of us. In the event that something was to happen to both of us, we named our parents as the beneficiaries. Since then we have had two kids and want the money to go to them. I have talked to my brother about taking the kids and becoming thier gaurdians in such an instance and was wandering how we would need to set it up so that my brother would be able to receive some of the money in order to take care of our kids, but I would also want a good majority set up for my children to have once they reach a certain age, and once their college is paid for out of it. I want things in the trust to say that the child must graduate from college as well before they can collect the money. If anyone has any ideas please let me know. Thanks

to be clear, and i hope you meant this, the PRIMARY BENEFICIARY on each of your life policies should be the other spouse, correct? it is the SECONDARY BENEFICIARY (in case BOTH of you were to die simultaneously) that you are inquiring about, if i did not misunderstand you. just making sure...

yes, you can establish a trust (living revocable?) through an attorney who is experienced in estate planning. you can make this trust the beneficiary of your assets and life policies. the trust can then have the stipulations/control of those things you mentioned. the details are best left in discussion with your attorney how best to set it up. i would NOT set it up for your brother to be the beneficiary. he would have no legal obligation to use it for your kids (not that you don't trust him, but i fear almost anyone can rationalize the unwise use of money to be "in the best interest of the kids" when they are desperate enough). talk to an estate-planning attorney and set up a trust. that is what i plan to do.

[Noelopan]

First off, we need to know why we should have life insurance. Insurance is income replacement so that in case of premature death, the income is not cut-off but is replaced by the death benefit. There are 2 challenges. First, is if in case of premature death, debt, children's education and final expenses should not affect the family financially and second, when you retire, you better have money. Insurance is what takes care of the first, and investment takes care of the second challenge.

[thewisebuck]

The following post is a little more on the basics of buying life insurance with a link to 6 tips for buying life insurance (at the end of the post)
http://thewisebuck.com/2009/08/18/li...urance-basics/