First National Bank and Trust is committed to helping educate all members in the community, and sometimes this takes a joint effort with other local businesses. For this blog piece we had the opportunity to work with three insurance agencies in Clinton to help get the best answers around life insurance and why it is an important necessity for estate planning. The answers below are broad and may answer your exact needs; however, the agents and us agree that you should always consult with your estate planning team (accountant, lawyer, trustee, etc.) pertaining to any specific questions you have.
Q: When is the best time to buy life insurance?
“At the earliest age to guarantee insurability” said Donald McClure from Farmers Insurance.
Jay Peterson from Peterson Insurance Services agreed, adding, “As soon as there is a need for it! The earlier it’s purchased, the better, because there are a number of factors that can make you ineligible or limit your options such as medical history and age. It also becomes more costly the older you are when the policy is purchased.”
Q: When is it better to have whole life or term life?
Kirk Neslund from Country Financial started by saying “Both are great options to have. Since 1991, I have paid out on both types for death claims. The main concern is to be covered. Whole life has policies that never raise in premium, where term policies are locked in lower premiums for 10, 15, 20 and 30 years.”
Dustin Peterson from Peterson Insurance affirmed this and added, “A combination of the two products works well for many people. Both products have positive aspects. Term coverage can provide coverage for a specified time in your life when you have more financial obligations or people depending on your income to provide housing and education among other things. Whole life on the other hand will not expire and can help cover final expenses or can even be left to family/charity.”
Q: How do you know how much life insurance is needed?
“Normally with life insurance you should have a minimum to cover your debt but no more than 15 times your yearly income” said Country agent Neslund.
Dexter Peterson of Peterson Insurance admitted “Every person’s need is different. We recommend making an appointment with an experienced, licensed agent to discuss your individual needs. That’s the great part about all of the life insurance products we have available from all of the companies we represent, we can really customize it to fit about anyone’s needs (and budget)!”
Q: What do you advise clients to do with the proceeds once they are received?
“Just be fiscally smart” said Farmers agent McClure.
“That is right” Neslund confirmed, adding, “It really depends on the estate plans already established and completed.”
Fiduciary Officer Matt Riley with First National Bank and Trust joined in by stating, “We always sit with our clients to go through the entire situation they are in. We show where they can either pay down debt, or invest the proceeds in a low risk option for the long-term”
Q: What is something clients may not know about life insurance?
“In most situations the advantage of a life policy is that it is currently a tax-free benefit” said Dustin Peterson from Peterson Insurance. “I would say about half of the people we interact with didn’t know that life insurance proceeds aren’t taxed”
Q: What are difference uses for life insurance, and what is the most unknown use of life insurance?
Jay Peterson began with “Some of the most common uses are to pay funeral expenses, pay off debts such as mortgage or other loans, and provide income for surviving family to live on.”
Affirming from his experiences, Neslund stated, “Our most common is for last expenses in the event of a passing of an individual. A lot are for debt where they don’t want their spouse to have to lose possessions in the event of an untimely death. Many people are shocked that ‘divorce decrees’ are common where a judge requires the soon to be ex to have coverage on them for the other person.”
Dexter Peterson finished with, “one of the more unknown uses would be for a business with multiple owners to have insurance on one another in the event of a death in order to have liquidity to purchase the ownership from that persons estate.”
Call Matt Riley at 217-935-2148 for more information on estate and trust planning.
Matt was named Fiduciary Officer and VP for First National Bank and Trust Company in December 2018, helping clients to meet their prosperity goals through investment and estate planning. Prior to joining FNBT, Matt had risk and compliance analysis experience at State Farm Bank in Bloomington, Ill. Matt is a proud Illinois State University Alumni, receiving his B.S. in Finance with an emphasis in Financial Planning. He has continued his education journey, earning other designations including the Chartered Financial Consultant designation. In addition to his bank service, Matt became a member of the Clinton Rotary Club in April of 2019 and became a board member for the Warner Hospital & Health Services Foundation in May of 2019.
About First National Bank and Trust Co: First National Bank & Trust Company is a community bank located in Clinton, Illinois. Dedicated to community prosperity, the bank was chartered in 1872 under the name DeWitt County National Bank. The name was changed First National Bank and Trust Company in 1974, and was acquired by TS Banking Group in 2017. With $186 million in assets, First National Bank is dedicated to community reinvestment and gives 10% of its net income back to the community. For more information visit firstnbtc.com.