Facing a terminal illness alongside a loved one can prompt you to ask, "how does life insurance work?" Here are tips on how to get the answers you need.
Experiencing a terminal illness alongside a loved one is often life-changing, with questions abounding about what to do and how.
These thoughts inevitably lead to more questions, including how does life insurance work in these circumstances? And, how will you ever talk to your loved one about it?
The following is a guide on talking about life insurance and how to navigate such an essential conversation.
Understanding Life Insurance Basics
Purchasing life insurance should always be a top of priority, as it becomes difficult to get full coverage once certain diagnoses are made. And by purchasing early, it saves you and your family members any extra anxiety and financial stress.
There are many types of insurance that can be helpful for families, including term life insurance that offers fixed payments during a certain time period (perfect for those just starting out or on a budget).
Whole life insurance is also a good option for those who want to get a policy on the books that doesn't expire. On top of that, some whole life policies can include cash value dividends, which can help protect family members against sudden debt such as mortgages or unrelated bills.
Additional assistance can come from available Quality of Life insurance policies that offer "living benefits" to holders. Providing similar after-death benefits like traditional term policies, Quality of Life may provide financial assistance while the person is still living. Limitations to the benefits do apply, so be sure to look into Quality of Life policies to see if your loved one qualifies.
How Life Insurance Works After a Diagnosis
If you have a term life insurance policy, then you can expect the policy to pay out in full to the designated beneficiaries. Your diagnosis should not affect the ultimate payout due to family members.
Whole life coverage may include the ability to grow cash value dividends, which can be used or borrowed against to help pay for certain things, including some medical bills.*
It's important to note, however, that if you do borrow off the policy, this can decrease the full benefit for your family if you do not pay off the loan. Many people though find this to be a helpful option, if the need arises.**
Starting the Life Insurance Conversation
The end of life comes with deep, serious and sensitive issues. While you want to be tactful and considerate in discussing details of someone’s impending death, sometimes you may need to get answers to specific questions, such as ownership of a life insurance policy. And once you determine if your loved one had a policy, questions may still remain on how to access the life insurance benefit for your family.
Taking the time to have this conversation means less time worrying over financial matters, and more time concentrating on your loved one and their needs. If you have older parents, its highly recommended that you talk with them as early as possible about their life insurance, especially if you hold power of attorney or will be managing their final estates.
How to Have This Important Talk with a Loved One
There are a number of methods to initiate this conversation in a gentle and considerate manner, such as:
- Raise a discussion about charitable giving. Often, this approach leads to a conversation about final directives and the best way to cover them.
- Enlist the help of a trusted clergy member if your loved one is a devout practitioner.
- Invite your loved one to talk about any fears they may be facing regarding their illness. The subject of one’s passing is incredibly delicate so be understanding.
- Talk about their life. Focus on the fullness of it instead of the nearing end, celebrating the all-embracing scope of their existence. This will allow any end-of-life conversations to flow more naturally.
Know What Questions to Ask
With tenderness and empathy, there are bits of vital information that you will need, including:
- What company holds the policy?
- Who was the agent/agency who wrote the policy?
- Are there documents (including policy number) available?
- What is your loved one’s social security number?
Knowing the answer to these questions will make many things easier for the remaining family when the time finally comes. Thus, allowing everyone the space to process their emotions rather than worry about other stressors.
The Next Step...
Understanding the benefits of life insurance prepares you for an important end-of-life conversation with your loved one. If you have questions about your loved one's current policy, please contact us to learn more.
*Withdrawals or loans are subject to regular income tax and an additional 10% tax penalty may apply if taken prior to age 59 ½.
**Availability of policy loans and withdrawals depend on multiple factors including but not limited to policy terms and conditions, performance, and fees or expenses.
