Life Insurance in Excess of Recommended Amount
Since ESP recommends and incorporates enough life insurance to maintain the survivor's standard of living, how do you handle a situation where you already have in force an amount of insurance that exceeds the recommended amount? For example: assume the Husband has actual life insurance of $700,000 and ESP recommends $400,000. How do you account for this extra $300,000 in real extra cash that will eventually end up in the hands of the spouse upon the husband's death?
It seems as if this excess insurance (in this case, $300,000) should somehow be accounted for as a contingent special receipt. But ESP only lets you select a specific year for contingent special receipts (which doesn't really work since you don't know what year you are going to die). So unless there was an option for "Immediately After Spouses Death" (like there is for the housing folders under Contingency Planning) I'm not sure this would work.
Thanks.
Rick
RSS
Rick:
I believe that you just indicate that you want to leave 300k as special bequest. That option is in the Estate panel. Then it should indicate you need 700k of insurance. See if that works.
On second thought, that will probably ask you to buy more insurance that you presently own because the bequest will extend clear to your death at 95 or 100, not just as long as you hold your current term insurance (five? ten? fifteen? years). But with just a little trial and error, you'll be able to find the bequest that will assign you 700k of term insurance.
In other words, one way to approach it is to find out how much "bequest" that this overpayment of insurance will buy you. Just try different bequest amounts until you get a recommendation for 700k of insurance. Then you'll know that you are covered for your standard of living needs, but also X amount of bequest to the survivor.
That's one day to deal with it. There may be other ways.
Dan
Thanks for your suggestion Dan. I'll do some trial and error with the bequest and see what happens. Rick.
HI, I COPY YOUR QUERY BELOW. WE ASSUME THAT YOU'LL BUY THE RECOMMENDED LIFE INSURANCE, WHICH IN YOUR CASE WOULD ENTAIL DROPPING SOME COVERAGE. BUT IF YOU DON'T WANT TO DO THAT YOUR COULD ENTER THE EXTRA $300K IN THE RESERVE FUND FOR EACH FUTURE YEAR. THAT WOULD BE MADE AVAILABLE TO SURVIVORS, BUT WON'T BE SPENT. BEST, LARRY
Since ESP recommends and incorporates enough life insurance to maintain the survivor's standard of living, how do you handle a situation where you already have in force an amount of insurance that exceeds the recommended amount? For example: assume the Husband has actual life insurance of $700,000 and ESP recommends $400,000. How do you account for this extra $300,000 in real extra cash that will eventually end up in the hands of the spouse upon the husband's death?
It seems as if this excess insurance (in this case, $300,000) should somehow be accounted for as a contingent special receipt. But ESP only lets you select a specific year for contingent special receipts (which doesn't really work since you don't know what year you are going to die). So unless there was an option for "Immediately After Spouses Death" (like there is for the housing folders under Contingency Planning) I'm not sure this would work.