• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Our Firm
    • About Our Firm
    • Attorney and Staff Profiles
  • Services
    • Asset & Business Planning
    • Dental Practice Law
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Medicaid and Elder Law
    • SECURE Act
    • Special Needs Planning
    • Trust Administration
  • Elder Law
    • Coping With Alzheimer’s
    • Emergency Medicaid & Nursing Home Planning
    • Guardianship & Conservatorship
    • Hospice Care
    • Medicaid Planning
    • Veteran’s Benefits
  • Resources
    • DocuBank
    • Elder Law
      • Elder Law & Medicaid Definitions
      • Elder Law Reports
      • Elder Law Resources
        • Carmel, Indiana Elder Resources
        • Fishers Indiana Elder Law Resources
        • Greenfield, Indiana Elder Law Resources
        • Greenwood Elder Resources
        • Indianapolis Elder Law Resources
        • Lawrence Elder Law Resources
        • Plainfield Elder Resources
        • Zionsville Elder Law Resources
    • Estate Planning
      • Estate Planning Checkup
      • Estate and Gift Tax Figures
      • Estate Planning Definitions
      • Estate Planning Reports
        • Advanced Estate Planning
        • Basic Estate Planning
        • Estate Planning for Niches
        • Trust Administration
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate and Legacy Planning Techniques
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Asset Protection Planning
        • Business Succession Planning
      • Elder Law
        • Medicaid
        • Medicaid Planning
        • Planning for Long-Term Care
      • Estate Planning
        • Avoiding Estate Taxes
        • Frequently Asked Questions for Families Without an Estate Plan
        • LGBTQ Estate Planning
        • Women and the Need for Estate Planning
      • Financial Planning
      • Incapacity Planning
      • Legacy Wealth Planning
      • Pet Planning
      • Probate
      • Power of Attorney
      • Trusts
        • Trust Administration
        • Trust Administration
        • Serving as Executor
      • Wills
        • Contesting a Will
    • Newsletter
    • Pre Consultation Form
    • Probate and Trust Administration
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss Of A Loved One
      • Probate Resources
        • Carmel, Indiana Probate Resources
        • Greenfield Probate
        • Greenwood Probate
        • Indianapolis Probate
        • Plainfield Probate
        • Indiana Probate
        • Zionsville Probate
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
  • Reviews
    • Our Reviews
    • Review Us
  • Areas We Serve
    • Boone County
      • Lebanon
      • Zionsville
    • Hamilton County
      • Carmel
      • Fishers
    • Hancock County
      • Greenfield
    • Hendricks County
      • Brownsburg
      • Plainfield
    • Johnson County
      • Franklin, Indiana
      • Greenwood
    • Marion County
      • Central Indiana
      • Indianapolis
  • Blog
  • Contact Us

Frank & Kraft, Attorneys at Law

Indianapolis Estate Planning Attorneys

CONNECT WITH US TODAY(317) 684-1100

Attend a Free Workshop
Home » How Does Life Insurance Work in My Estate Plan?

How Does Life Insurance Work in My Estate Plan?

August 4, 2021Insurance

  • Indianapolis estate planning attorney

For many people, life insurance plays an integral role in their estate plan. Exactly what role it plays, and how much life insurance is necessary, can be difficult to determine though. Moreover, both the type and amount of life insurance you need can change over the course of your lifetime.An Indianapolis estate planning attorney at Frank & Kraft helps you decide what type and how much life insurance is right for you.

Not All Life Insurance Is Created Equal

Deciding how much life insurance you need begins with understanding the various types of life insurance available. You will find that there are additional sub-categories and hybrids also available; however, the basic categories of life insurance include:

  • Term Life Insurance — term life insurance is usually the simplest and least expensive type of life insurance. A term life insurance policy is purchased for a specific amount of coverage and a specific “term”, or period, usually 10 to 30 years. The premiums are usually fixed for the period of the policy. The policy has no cash value and, therefore, cannot be borrowed against. When the insured dies, the policy pays out to the named beneficiary. If the insured outlives the policy, or there is a lapse in premium payments, no benefits are paid. A variation of traditional term life insurance, referred to as “non-level” term, does not remain the same for the life of the policy. Either the premiums increase, or the payout decreases over the life of the policy.
  • Whole Life Insurance – this type of life insurance is purchased in a specific coverage amount for the lifetime of the insured, hence the term “whole life.” Premium payments are usually fixed, meaning they will not change. Along with the insurance benefits you also get a savings component and will earn dividends from the insurance company. The policy will have a guaranteed cash value. Premiums will be higher than an equivalent amount of term life insurance.
  • Universal Life Insurance – universal life insurance is also purchased for a specific coverage amount; however, you may have the option to increase the coverage amount later if certain conditions are met. In addition, you may be able to change your premium payment amount if you have accumulated enough cash value in the policy. Your policy will usually earn an interest at a rate set by the insurance company. Cash value that can often be borrowed against is one benefit to choosing universal life. One disadvantage to universal life is that, unlike whole life, it has a termination age. Although the termination age is usually not until age 95 or 100, if you live that long your loved ones won’t be entitled to any death benefits.
  • Variable Life Insurance – variable life insurance is also another variation of whole life insurance. Variable life truly combines life insurance with investing. Once you accumulate savings, those savings can be invested in stocks, bonds, or mutual funds. You also have premium flexibility with variable life, meaning you can increase or decrease the amount you pay in premiums if you have sufficient cash value in the policy to do so. Variable life insurance offers the possibility of greater gains from the investment portion of your premiums, but also the possibility of greater losses.
  • Final Expense Life Insurance – as the name implies, final expense life insurance is a specialized type of life insurance intended to help cover the costs associated with your death. It is only available to people of a certain age and usually terminates at a designated age. This type of life insurance is often used in conjunction with an Irrevocable Life Insurance Trust (ILIT) as part of a funeral planning component within an estate plan.

How Much Life Insurance Do I Need?

Deciding how much life insurance you need should consider a wide variety of factors – and those factors are likely to change over your lifetime. If you plan to pay for your funeral with a life insurance trust, for instance, you will need to purchase or designate a policy for that trust. For those who are using life insurance as a safety  net to pay debts and provide for surviving loved ones, a common formula used to determine how much to purchase is as follows:

  • Add up your current resources which include after-tax income and liquid assets.
  • Add your expenses and debts to determine your existing financial obligation.
  • Subtract your liquid assets from your financial obligations to arrive at your “coverage gap”
  • The coverage gap amount represents the minimum amount of life insurance you need.

Contact an Indianapolis Estate Planning Attorney

For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about incorporating life insurance into your estate plan, contact an experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.

  • Author
  • Recent Posts
Paul A. Kraft, Estate Planning Attorney
Paul A. Kraft, Estate Planning Attorney
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.

Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Paul A. Kraft, Estate Planning Attorney
Latest posts by Paul A. Kraft, Estate Planning Attorney (see all)
  • How to Recognize Nursing Home Abuse - August 4, 2022
  • Do You Have the Right Type and Amount of Life Insurance? - August 2, 2022
  • The Problem with Relying on the Unlimited Marital Deduction - July 28, 2022

Other Articles You May Find Useful

life insurance
Do You Have the Right Type and Amount of Life Insurance?
The Hidden Value in Your Life Insurance
Frank & Kraft, Attorneys at Law
Postmortem Planning & Your Insurance Policies
Frank & Kraft, Attorneys at Law
Speak With Attorney After Spouse Passes
Frank & Kraft, Attorneys at Law
Life Insurance Proceeds Should Be Properly Positioned
Frank & Kraft, Attorneys at Law
Balancing Inheritances

Primary Sidebar

Frank & Kraft, Attorneys at Law

Download our free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

Follow Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube

Blog Subscription

Where We Are

Frank & Kraft Attorneys at Law
135 N. Pennsylvania Street Suite 1100
Indianapolis, IN 46204-2485
Phone: (317) 684-1100
Fax: (317) 684-6111

See Larger MapGet directions

Office Hours

Monday8:00 AM - 5:00 PM
Tuesday8:00 AM - 5:00 PM
Wednesday8:00 AM - 5:00 PM
Thursday8:00 AM - 5:00 PM
Friday8:00 AM - 5:00 PM

Map

frankkraft_sidbr_map

Footer

  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Connect with Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
footer-logo

Frank & Kraft Attorneys at Law
Attorney Advertisement

© 2022 American Academy of Estate Planning Attorneys, Inc.

© 2022 · American Academy of Estate Planning Attorneys, Inc. | Disclaimer | Privacy Policy | Sitemap | Contact Us