What you Need to Tell your Family About your Life Insurance

Feb 5, 2020
Categories: Home Insurance · Safety · Security
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Great, you’ve done the responsible thing and you’ve purchased a comprehensive life insurance policy. Now you can rest easy knowing that should anything unfortunate ever happen to you, your family will be protected. But are they? A good life insurance policy can only help your family if they are aware of it. When you purchase a life insurance policy, be sure to do the following to make sure your family has the information they’ll need on the worst day of their lives.

Talk to your family about your life insurance

Life insurance is one of the best ways to protect your family. It’s a way of making sure that even after you’re gone, you’ll still be providing for them and watching over them every step of the way. Policies differ, with larger ones leaving a sizable pad of revenue to keep your family financially secure (very important if you are the main breadwinner), but even smaller policies serve the important purpose of paying for your funeral expenses and providing a financial buffer so your family won’t be stuck with a pile of bills while coping with your loss.

Your family should be aware that this protection exists and that they will be able to access it when they need it. If your beneficiaries don’t know they’re on your policy, all your efforts will be for nothing. They need to know which brokerage or company is managing the policy, exactly who is named in it, and how much they can expect for it under what conditions (some policies pay more for sudden or accidental death for example). You might think this goes without saying, but every year thousands of people fail to make rightful claims on policies that could help them. Don’t let your family end up as one of them.

Create a plan for your family

Think about what your family would need if you were to suddenly pass or be unable to communicate with them. They would need to know what policies you have (personal, employer, etc) and which brokerages or companies manage them. Next, they need access to important documents and records that lay these details out. They need a copy of your policy with your identification numbers on it, contact information if you work with a particular broker or agent (this will speed up the process of making a claim), and any other documents that may be relevant such as a will.

This is where it can get tricky.

Every year I take down the Christmas lights and ornaments. I wrap up the cords, the garlands, and tuck away each little glass ball and star. I put them in the basement in a box “where I’ll remember it.” Every year come Christmas time, I’m down on my hands and knees searching through box after box for them promising myself that this year I’ll write something on the side or put it someplace where “I’ll REALLY remember it.” If this is the kind of thing we can forget in a year, how can you expect your family to know where you placed a document 10, 15, or 30 years ago? You need to have a specific storage system for these important documents.

A file cabinet is the simplest choice. Get a file cabinet,  make a folder clearly labelled “insurance” and keep all of your information there. This way if you pass, your family instantly knows the most likely place to check. However, this isn’t an entirely ideal storage system. What would happen in the event of a fire or a flood? You could end up seeing your important information damaged.

This is why many people opt to store their documents in a fire-proof safe or even a safe deposit box at a bank. This is more secure, but you also need to make sure your family knows about and can access these places. Your policy doesn’t do your family much good if it’s in a deposit box they don’t know about or have a key to. If you choose to do this, they need to know exactly where your safe or deposit box is and have clear access to it with a copy of the key (ideally multiple keys across different beneficiaries to increase the odds of someone holding on to theirs and having it at hand when needed).

Of course, in our modern age, a lot of important correspondence and documentation is stored digitally. Do you have a plan in place to allow your loved one’s access to your computer or email after you die or can’t communicate? Think about your PC and phone set up, do you have passwords on them? What about 2-factor authentication or the answer to security questions if they needed to reset your passwords? These are all important things to consider and should be discussed in detail with a trusted family member.

Take a test run

This may seem like overkill, but it really isn’t. Take your immediate beneficiary (the one most likely to handle things in an emergency) on a test run of where your documents are stored and what they’ll need. Show them the physical location where the documents are stored and make sure any keys you’ve given them work. Same with electronic access, if they’ll need to access your computer, have them do it in front of you to make sure they can.

Keep everyone up to date

A lot can happen over the years. Policies change, agents and brokers leave, different companies merge with each other and so on. The info you have from a decade ago likely won’t be totally up to date if an emergency was to happen now. Make sure you keep your beneficiaries aware of any major changes to your policy and keep any new important documentation in with your previous documents where they can find them.

A little preparation can help spare your family a lot of heartache down the line. In the event of your passing, you want to know that their immediate needs are met, not that their mourning will be compounded by a mad scramble to find information nobody has seen in 15 years. An honest conversation and some legwork now will protect your family when you’re gone.

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