Insurance

The 3 Estate Planning Documents Everyone Should Have The best thing you can do for your future self and your loved ones is prepare for the worst. Create your estate plan with these three essential documents. We all have an estate, even if we’ve never thought about it. Each of our estates includes our financial assets, bank accounts, life insurance, pensions, real estate, cars, personal belongings, and even debts. Estate planning means putting a plan in place for how the physical and financial assets we described above will be transferred after either your death or a serious illness. It is crucial for everyone to prepare an estate plan, no matter what the value of your estate is. It will help others follow your wishes when it comes to protecting your family, loved ones, and assets—in case you’re unable to do so. Don’t know where to start? All you need for a basic estate plan are three essential documents. 1. Financial Power of Attorney A durable financial power of attorney document (POA) allows you to designate someone to handle your finances if you are unable to do so. The person you choose is considered to be your designated agent. If you don’t designate an agent, it may be difficult for someone—even your spouse—to do things on your behalf, such as pay bills, file taxes, or cash checks. Your agent’s signature will be required for every decision, so before choosing an agent, consider their schedule and where they live. Betterment can take direction from your agent if you have an approved POA on file with us. Note that we are not able to create a POA document for you—this is something your legal counsel can help you with. Your POA must clearly reflect that you allow your agent a sufficiently broad scope of capabilities, such that they are able to fully interact with the account. The POA must undergo an approval process with our estates team before it's considered to be valid. For more information, please contact us. 2. Advanced Health Care Directive An advanced health care directive allows you to designate someone to make medical decisions on your behalf. Again, this person is known as your agent and they can make decisions such as choosing a doctor, accessing medical records, and putting you on life support. Your agent’s signature will be required for every decision, so before choosing an agent, consider their schedule and where they live. Make sure your doctors have a copy of your advanced health care directive on file. Some entities may even require additional documentation or have specific procedures when dealing with agents. Make sure to check ahead of time to avoid putting your agents in a difficult position. 3. Last Will and Testament Your will is the document that determines who will inherit any of your assets if there is no joint ownership, or beneficiaries are not file at an institution. If you named beneficiaries for most of your assets, this document will mostly be reserved for your personal belongings. However, a will can help with other important decisions, such as naming a guardian to look after your children. You’ll also choose an executor in your will, which is the person who is charged with ensuring your wishes are carried out. Protect What’s Important An estate plan is an important step to help ensure that you and your assets are protected. We highly recommend speaking with an estate planning professional or an attorney to help you implement your estate plan. Once your estate plan is set up, you’ll want to review it every two years at least, or whenever there is a major life event such as marriage, divorce, or death—especially among your beneficiaries. Additionally, if there are any significant changes to estate planning laws, you’ll want to review your plan again. Betterment does not currently offer estate planning services. We do, however, encourage you to add beneficiaries to your Betterment account, which you can do in your account without any paperwork. Our Experts Can Help You Plan Our team of CERTIFIED FINANCIAL PLANNER™ professionals are ready to speak with you about planning for the next stage in your life. We offer five unique advice packages that help you review your current financial situation. Our Financial Checkup or Marriage Planning packages provide a perfect opportunity to discuss basic estate planning recommendations.

What Is A Life Insurance Beneficiary? If you have an active life insurance policy when you die, your insurer will pay out a death benefit. The person or organization you choose to receive the death benefit is called the beneficiary. If you have a life insurance policy, and you’ve been keeping up with your premiums, your insurer will pay out a death benefit when you die. The benefit goes to someone who you designated with the insurance company, such as your spouse. That person is called a beneficiary. Your life insurance beneficiary can be a family member, a friend, a business partner, a charitable organization or a legal entity like a trust or your estate. While the beneficiary is your choice, some states have laws that regulate who you can name as a beneficiary. You can also name multiple people as beneficiaries and choose to have the death benefit distributed among them. Read on to learn about the different types of beneficiaries, who can be a beneficiary, and the roles and responsibilities of the beneficiary. In this article, we’ll cover: Primary and contingent beneficiaries. Who can be a beneficiary. How to update your beneficiaries. How a beneficiary can claim the death benefit. Can a life insurance beneficiary get denied the death benefit? Naming your life insurance beneficiary is a big decision, so we recommend consulting with an estate planning professional for guidance Primary And Contingent Beneficiaries Your primary beneficiary is the original person or organization you designate with the insurer to receive the life insurance benefits when you die. Most people designate their spouse. You can also name multiple beneficiaries and determine how much each one gets. If you don’t choose any primary beneficiaries, the insurance company will pay out your benefit to your estate. This can significantly slow down the disbursement of life insurance benefits because your benefits are subject to probate, which is when the courts determine who should get your assets. You may also have to pay tax on your life insurance benefit if it goes to your estate. You’ll also want to choose some contingent beneficiaries. A contingent beneficiary is someone you elect to receive the death benefit if the primary beneficiary dies or goes out of business before you die. Although the contingent beneficiary is named in the life insurance policy, they won’t receive a portion of the death benefit if any of the primary beneficiaries are still alive. The first contingent beneficiary you name is called the secondary beneficiary, the third is the tertiary beneficiary and so on. Who Can Be A Beneficiary Your Spouse Most people choose their spouse as their primary beneficiary. Life insurance is meant to help protect your family from financial hardship after you’re gone, so by leaving money to your spouse, you can help ensure that they won’t struggle with paying the bills or for your kids’ college. Additionally, nine states have “community property” laws that make it illegal to name someone other than your spouse as your beneficiary without their consent. These laws generally apply only if you got the policy after getting married. These states have community property laws: Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin Alaska and Tennessee also have community property laws, but they are voluntary. You and your spouse have to opt in to them. Your Kids We don’t recommend naming your children as beneficiaries if they’re still minors. It’s very difficult to pay out such a large sum to a child without jumping through some legal hoops. If you designate a minor as your beneficiary, when the insurer pays the death benefit, it will go into a trust overseen by a court-appointed guardian. That guardian will hold onto the money until the child reaches the “age of majority.” You can also designate a trust in the child’s name as the beneficiary, and the fiduciary in charge of the trust will pay out the benefit when the child becomes eligible. Nonrelatives You can designate a business partner or even just a friend as a beneficiary. Remember, your beneficiary can be anyone you want, with one exception: If you live in a community property state, you will need to get consent from your spouse in order to pay the benefit to someone else. Organizations Your beneficiary doesn’t have to be a person. You can direct your life insurance policy to pay out to an organization, such as your business. Many people select an organization as their beneficiary if their family is already well-off. A sudden injection of cash can help any business manage the loss of an employee or owner. You might also consider a charity or nonprofit. These organizations often operate with tight margins, and you can help further their mission by naming one as a beneficiary of your life insurance policy. A Trust Another way to leave an insurance benefit to your intended beneficiary is by having the insurance company pay out to a trust. Trusts are also useful because if you’re considering an unusual choice as your beneficiary, you might run into resistance from the insurer itself. In that case, you can name a trust as your beneficiary so that an appointed conservator can receive and disburse the money on your behalf. People have even used trusts to effectively leave money for their pets. You would accomplish that by naming someone to inherit the pet in your will, and then establishing a trust to pay for the pet’s care using the money from the insurer. There are multiple types of trusts, like irrevocable and revocable living trusts, and you might not even need one depending on what assets you have and what’s in your will. How To Update Your Beneficiaries You can change your life insurance beneficiaries at any time by contacting your life insurance company. Common reasons to change beneficiaries include getting married, getting divorced, or if your original beneficiary dies. How you actually update your life insurance beneficiaries will depend on which carrier you have your policy with. Some allow you to update beneficiaries online. Others require a phone call or for you to fill out a paper form that you either mail or fax. How A Beneficiary Can Claim The Death Benefit The beneficiary needs to do a few things before the insurer pays out: Get a copy of the death certificate. This proves that the claim is legitimate. Find the policy document. This paper has the details of your life insurance policy. You should have this document in your records and you should always make sure your beneficiaries know where to find it. Otherwise they may have to call up insurance companies to find the one that insured you. File a “request for benefits”, or claim form, with the insurer. How The Beneficiary Gets Paid Once a beneficiary finds the right paperwork and correctly submits the claim form, they will get paid the death benefit. This is the amount of insurance coverage you purchased. So if you had a $1 million policy, your beneficiary will receive $1 million (with rare exceptions). There are two options for how to receive the money: Lump sum. Your beneficiary can request the entire amount all at once. That’s useful if he or she has any immediate expenses to cover, like your funeral or mortgage payments. The best part is that it’s typically tax-free. Installment or annuity. Your beneficiary can also request to receive the payments in monthly or annual installments. This might be beneficial if they think it’ll be easier to manage, or if they know their spending habits are less than thrifty. Installments can be spread out across five to 40 years. Can a life insurance beneficiary get denied the death benefit? There are a couple of scenarios where the life insurance carrier may deny your beneficiary’s claim to the death benefit. If your beneficiary is suspected of foul play, the insurer will (hopefully) reject their claim. Thanks to “the slayer rule,” most states won’t pay the benefit if there’s any evidence against the person trying to claim it. The insurer may also deny your beneficiary if you die of a disease that you didn’t mention in your application or that was caused by something you didn’t mention. For example, if you die of esophageal cancer, but you failed to mention your smoking habit on the life insurance application, the insurance company could withhold the death benefit. Similarly if the insurer finds out you died from a previously undisclosed risky hobby, the insurer could recalculate your premiums to the amount it believes you should have been paying and subtract that amount from the payout. Ultimately, there are many reasons why a life insurance beneficiary may be denied the death benefit. Make sure to check-in with your life insurance provider about what scenarios may fall under this category. Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you. This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services. The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice. Betterment makes no warranties or representations with respect to specific insurance offerings.

How To Find Affordable Life Insurance Buying cheap life insurance doesn’t have to mean skimping on coverage. Knowing how companies set rates means you can take the right steps to finding an affordable life insurance policy. Life insurance is a crucial part of a financial safety net. But in addition to getting the best life insurance coverage, you also want to find an affordable life insurance plan. It may seem like there has to be a tradeoff between finding a cheap policy and a comprehensive one, but there are things you can do to help you find an affordable policy. In this article, we’ll discuss how to: Buy life insurance early. Buy a term life policy. Get the right amount of coverage. Understand the underwriting process. Choose the best life insurance company for your situation. Compare quotes. Don’t be afraid to use a broker. Buy life insurance early. Life insurance isn’t usually a top priority for young people, since they might not have mortgages, dependents or the same financial responsibilities that older people might have. But one big way to help yourself get cheaper life insurance is to buy early. Life insurance is almost always cheaper the younger you are when you buy it. Rates rise an average of 8-10% every year you put off applying. Plus, when you buy young, you lock in premium rates for the entire duration of the policy. That means you’ll be paying the same low insurance premiums decades later. The following table demonstrates how the monthly cost of a term life insurance policy increases as you age, based on three coverage amounts. These numbers reflect the average monthly premiums for men. Average rates for women are generally lower. Average Life Insurance Rates By Age AGE $500,000 $750,000 $1,000,000 30 $25.97 $36.25 $43.94 35 $27.26 $38.18 $47.37 40 $36.68 $52.28 $65.32 45 $58.22 $84.75 $108.15 50 $87.81 $129.13 $167.06 55 $140.95 $208.85 $257.14 60 $233.36 $347.46 $456.42   This explainer gives an in-depth look at life insurance rates by age and the benefits of buying young. Shopping for life insurance over 50. Even though you’ll typically get better rates if you buy when you’re younger, you may still need to buy insurance later on in life. While it will inevitably be more expensive, it’s still possible to find low-cost life insurance, especially if you’re healthy. One way to find an affordable insurance policy is to look for a smaller benefit amount and shorter term length than you would if you were buying in your 30s. Now, this doesn’t mean you’re giving up the coverage you need in order to save money. Because you have fewer, if any, dependents, you likely just don’t need as much coverage as you would have needed decades earlier. So consider a smaller policy, such as one that lasts just until your mortgage is up. This guide will help you determine what length of benefit you actually need. You can also look into types of no-medical-exam life insurance, like simplified issue or guaranteed issue life insurance. These allow you to apply for a life insurance plan without getting a medical exam. They can be more expensive than a typical term policy, but they’re still a good option for some older or less-healthy applicants because they have less-stringent health qualifications. If you’re an older applicant, start your search by learning more about the best life insurance for seniors. Buy a term life policy. In almost every case, term life insurance is the most affordable option. It’s also the most straightforward type of life insurance; it provides only a death benefit, without any additional investment components, and it expires after a set period of time. Because you can choose whichever term length works for your situation, you only pay for the insurance coverage you want. If you’re in your mid-30s, you could realistically take out a 20-year, $1 million term life policy and pay insurance premiums of about $45 per month. Affordable Whole Life Insurance Whole life insurance is a type of permanent life insurance, which means it lasts for as long as you continue paying your premiums, with no expiration date. It’s also a type of cash-value life insurance with an investment option that gains interest over time. A whole or permanent life policy can be a valuable tool for some people, especially those who have complex financial situations and would benefit from the cash value. However, the investment component and maintenance fees make whole life insurance rates up to six to ten times as expensive as term life. If you do want a whole life policy, the best way to find an affordable policy is to be smart about the coverage you need, the company you choose, and your overall health. Long-term Care Insurance The majority of people who turn 65 will need some form of long-term care and the U.S. Department of Health & Human Services, estimates an average cost of $138,000. So while a death benefit can help your loved ones after you pass, you may also need to pay for care before you pass. That’s where long-term care (LTC) insurance comes in. LTC insurance helps you pay the costs associated with chronic illnesses, like Alzheimer’s, that leave you unable to care for yourself. LTC can cover nursing home costs and at-home care if you’re unable to live alone. LTC insurance can be costly so there are a couple of things to consider. For starters, ask about a long-term care rider as you look for your regular life policy. Some companies offer standalone LTC plans but they are usually more expensive than a rider and it’s harder to qualify for them. The other advice in this article also applies to getting LTC. In particular, you can save significantly by getting coverage for LTC in your 50s or earlier. By the time you get into your 60s, adding LTC to your insurance will cost you thousands more. Supplemental Group Life Insurance Another way to keep a personal life insurance policy affordable is to supplement it with employer-provided coverage. Group coverage through a workplace is a common benefit that you can get at little or no cost. The downside is that it usually won’t provide enough coverage for all your needs and it’s tied to your employment. But while an employer-provided group policy isn’t enough on its own, it can supplement a private policy. If you’re able to get, for instance, $50,000 worth of coverage for free, you can consider lowering your private policy (and thus your monthly premiums) slightly to make it more affordable. Get the right amount of coverage. It’s easy to overestimate the amount of life insurance you need and buy too much, raising the cost considerably. But it’s also easy to underestimate how much you need, potentially leaving your beneficiaries on the hook. A good rule of thumb is that the insurance you need is equal to 10-12x your salary. You can estimate how much coverage that means for you by using a free life insurance calculator. You can also crunch the numbers on your own if you prefer. Either way, make sure to consider all of your financial obligations when choosing a benefit amount and term length. For example, take the following into account: Existing debt, like a mortgage or student loans. Future college plans (for you, a spouse, or a child). Dependents, including children and aging parents. Any financial cushion you want to leave behind. Final expenses, like end-of-life medical care or funeral costs. Consider the ladder strategy. One tricky situation when it comes to how much life insurance you need is that your coverage needs decrease over time: your mortgage debt decreases, you need to provide for kids for less time, and so on. By using the ladder strategy, you can get the coverage you need while ensuring you’re not paying for coverage you won’t need later in life. With the ladder strategy, you buy multiple policies of varying coverage amounts and term lengths. As the decades pass, some policies will expire, and at the end you’ll be paying for a small policy that covers your current needs and nothing extra. Policyholders can spend up to 50% less on life insurance by laddering smaller policies versus buying one larger policy. Understand the underwriting process. Life insurance companies largely set the price of policies through the underwriting process. This is where they determine how risky an applicant is to insure by using: Your current health and medical history. This is done primarily through a paramedical exam and a request for documents from your doctor. Motor vehicle reports that show your driving record. A phone interview with you to find out if you have any dangerous habits (like smoking) or hobbies (like rock climbing). At the end, the underwriter will assign a classification to you that determines your policy cost. There isn’t anything you can do to change what happens in the underwriting process, but knowing beforehand what insurance companies look for can help you take steps to lower your insurance costs. For example, a health condition like diabetes can result in more expensive life insurance. But with certain steps to manage your condition, like taking the proper medication or treatments, insurance carriers may lower your premiums. Before you apply for life insurance, help yourself by taking a minute to learn more about what happens during the life insurance underwriting process. Choose the best life insurance company for your situation. Life insurance companies use your health to determine your policy cost, but not all carriers treat health conditions the same way. One common example is that certain companies offer better rates than others for former or current smokers. Certain companies also offer better rates for people of certain ages, military personnel, high-net-worth individuals, recovering alcoholics, those who recently lost weight, people with high blood pressure, or individuals with certain types of cancer. These differences between companies are why the best life insurance company for you is usually the one that is most accommodating to your health situation. Going with the wrong one can cost you thousands of dollars over the decades you own the policy. To see which companies offer comprehensive and  affordable life insurance coverage based on specific factors like your age, lifestyle, or health circumstances, see our page on a few top life insurance companies. Compare quotes. Taking all of the above into account — coverage amount, type of policy, company differences — can feel overwhelming. But if you want the best insurance rates, it’s also crucial to compare life insurance quotes for different plans. An easyway to quickly compare quotes from multiple insurance carriers is with an automated process like Policygenius. Otherwise, you will need to do all of the above — figure out what type of insurance you need, the death benefit size, which company is best for a given health situation, and more — and then go to each company individually, write down their offers, and compare manually. And if you do it manually, you’ll still need to apply through the insurance carrier, another thing Policygenius helps you do quickly and without putting you through a confusing online application. Don’t be afraid to use a broker. Knowing how to get an affordable life insurance plan is important, but so is recognizing some myths about saving money. It’s untrue that you can save money by buying directly through an insurance company. Using a life insurance agent or broker does not come with additional costs. Life insurance rates are highly regulated, so the same policy cannot be offered at a discount by some parties or marked up by others. You will pay the same amount for an individual policy whether you buy from the carrier or use an independent broker. Additionally, independent brokers (like Policygenius) can help guide you through the process and answers questions you may have about how certain policies or companies compare. We’ve also debunked a few other common myths about life insurance to make sure you understand what you’re getting with your policy. Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you. This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services. The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice. Betterment makes no warranties or representations with respect to specific insurance offerings.