October 18, 2006

$ & Sense

Securing Your Loved Ones Requires Careful Planning: Life Insurance Principles

Your life insurance policy could well be the most important purchase you will ever make. Insurance is complex, but here are some basic principles you should keep in mind when thinking about your insurance policy:

Buy too little coverage and you may fail to provide your family with financial security or even basic needs. Buy too much and you lose the opportunity to profitably invest or enjoy the money you're putting into premiums. Plan carefully.

Distrust rules of thumb, such as "you need five times your annual salary in life insurance" or "always buy term and invest the difference." There's no magic formula. Do you need to pay off estate taxes or debts? Does your need for insurance change when your children leave college? Do you expect a pension to kick in at some point? Will you still need insurance then? Insurance needs can vary widely between families.

Term insurance is usually more affordable, but what happens at the end of the term? Will you still need insurance after 65? If so, will you be able to renew? Will you be able to qualify? You may need a permanent policy, rather than term insurance.

Review and update your policies annually, or after every life-changing event. If you marry or divorce, look carefully at who you have as your beneficiaries. For example, many remarrying spouses make the mistake of changing their policies to name the new spouse as sole or primary beneficiary. But your new spouse's will may leave everything to his or her own children from previous marriages. The result: Your own children from previous relationships may find themselves accidentally disinherited.

Let's sit down and review your plans. We can help you decide how much and which coverage may help meet your needs. Please call.

Michael Pellman, Morgan Stanley, Retirement Planning Specialist, Riverhead, 284-5213, michael.pellman@morganstanley.com

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