1. Choose your agent wisely. Make sure s/he specializes in special needs planning! You may have a friend, Joe, that sells life insurance, but that does not mean that he fully understands the intricacies of special needs planning.
2. You may need to buy several types of insurance if you want your family to be fully protected:
- Term Life insurance to protect your family’s income;
- Second to Die policy to fund the Special Needs Trust;
- Disability insurance to protect your income;
- Long term care insurance to protect your assets should you become mentally or physically disabled or incapacitated.
3. Assess your current life insurance policy, i.e., the amount of coverage, the cost of premiums and the guaranteed death benefits. If you have owned your current policy for many years, you may want to keep it. Does your life insurance contain a terminal illness or disability rider?
4. When buying new insurance, compare the different kinds of insurance policies. There are two basic types of life insurance:
- Term insurance, which has no cash value;
- Policies which accumulate cash value.
5. Only buy insurance from a reputable company that is "A" rated or higher. You may want to buy from several different insurance companies to spread your risk.
6. Never CANCEL any existing insurance policies until you receive the new replacement policy and have gone over it thoroughly with your agent. You need your agent to review the outline of coverage. You must sign and date a policy delivery receipt. In many cases, it may make sense to keep your old policy in addition to the new policies.
7. Before you buy a new policy you must determine your ability to pay the premiums on the new and/or current policies for life (or the term of the policy). You need to go over your budget to make sure that this is something that you can afford now as well as in the future.
8. When evaluating insurance needs there are many things to take into consideration. The intricacies of differing policies are why we recommend that you select a professional rather than try to handle it on your own. Based on the answers to the questions below, you will be able to determine whether the policy or policies that you have chosen will be sufficient to cover the financial effects of your and/or your spouse’s unexpected or untimely death or disability. You may need insurance to protect your family at the death of the first spouse. How much of the family income does that spouse provide? Does anyone else depend on you financially? How will your family pay final expenses and repay debts after your and/or your spouse’s death?
9. Have an insurance agent help you evaluate the future of your policy. How quickly does the cash value grow? Some policies have low cash values in the early years that build quickly the longer you hold the policy. Other policies have a more level cash value build-up. Ask your agent for a year-to-year display of values and benefits.
10. Understand renewal policies. You can renew most term insurance policies for one or more terms even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also, ask if you will lose the right to renew the policy at a certain age.
11. Read your policy carefully. Do premiums or benefits vary from year to year? How much do the benefits build up in the policy? What part of the premiums or benefits is not guaranteed? What is the effect of interest on money paid and received at different times on the policy? These are all questions that you should be able to answer by reading your policy thoroughly. Your agent can help you understand things that are unclear.
12. Review your life insurance program every few years. How will inflation affect your future needs? Do you need more insurance when your family size increases? Review your policy with your agent every few years to keep up with changes in your income and needs.
