You may be tempted to lock in on specific life insurance product solution after examining premium quotes. This is a common mistake that often leads to bad outcomes and unmet expectations. Premium quotes are just numbers on a piece of paper. You must qualify for coverage and be assigned a risk classification which determines the cost of your policy. Until you know what pricing level you qualify for, you have no way of knowing the right carrier, product type, or funding strategy. Furthermore, life insurance is usually integrated into your other planning strategies and wealth transfer objectives. As such, many factors will influence selection of a life insurance carrier, product type, and funding strategy. Below are several factors that must be explored in arriving at the appropriate products and strategy choice.
Ownership.
Who Owns the Policy?
- Ownership is typically via an Irrevocable Life Insurance Trust (ILIT) to avoid inclusion of life insurance death benefit in the estate. If other planning has resulted in existing trusts, those trusts may be viable policy ownership candidates too.
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