Life insurance isn’t something you talk about every day. However, if you have dependents like a spouse, child or other family member who relies on your income, it’s important that they’re informed about your policy. Here’s what your dependents need to know about your life insurance policy.
- Where it is: Tell your dependents the location of your life insurance policy. Do you keep a digital copy on your computer or in the cloud? Or perhaps you have a hard copy in your desk at home or in a safe at the bank. Wherever you keep it, make sure they can access it in the event of your death.
- The life insurance company and your contact there: Which insurer underwrote the policy, and what’s the name of the agent who handled your policy? It’s often easier for dependents when they can speak with someone who’s already familiar with your situation.
- What the death benefit is intended for: The purpose of the death benefit should align with your dependents’ situations. You need to make sure your loved ones know what it’s intended for so they don’t waste it on unnecessary expenses. For example, perhaps you want to make sure your spouse has sufficient resources to pay off the mortgage on the house while your children have enough money to go to college. Alternatively, you might intend the death benefit to function as long-term income for a disabled dependent.
- The type of insurance policy: It’s important that your dependents are aware what type of insurance policy you have so they understand what they can count on. For example, if you have term life insurance, they’ll know that the policy runs out after a certain number of years. On the other hand, a whole life policy is valid until you pass away, so long as you pay your premiums.
- Whether or not the policy includes a long-term care rider: Some policies allow you to purchase riders that ensure you’ll have long-term medical care in the event you need it instead of simply paying a death benefit. As NerdWallet explains, there are also combination policies that combine long-term care with permanent life insurance so you can have care and your dependents still receive a payout when you die. If you have a long-term care rider, make this clear so your dependents know it’s available if necessary.
In addition to sharing this information in a conversation, it’s advisable to create a document that your dependents can keep in their possession until they need it.
Discussing your life insurance policy with your dependents might be uncomfortable, but it’s necessary. So set some time aside for a conversation, and make sure you cover all the points listed above. In the long run, it will be one less thing your loved ones have to worry about after you pass away.
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