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Relying on insurance as part of your estate planning

Many people who may not have a wealth of money, property or assets rely on insurance policies to take care of their loved ones if something happens to them. While relying on an insurance policy to take care of your family is a great idea, there are a couple of things to keep in mind.

First, don't neglect to take care of what assets and property you do have, even if it is not much. Your loved ones will no doubt attach emotional value to the little things you own, as well as anything of worldly value. The last thing you would probably want after you are gone is for your family to fall apart over a dispute about a sentimental item.

The second thing to keep in mind about insurance policies is that you must be totally honest when applying for your policy. If you are relying on a life insurance policy to cover your family in the event of your death, it can give you a feeling of satisfaction knowing they will be financially okay. But if you have not been totally honest on your application for insurance, your policy could be denied leaving them with nothing.

For example, if you apply for a life insurance policy claiming you are a nonsmoker and that is not true, your coverage could be at risk. The insurer has covered you in good faith with a premium for a nonsmoker. They may be able to deny the claim upon your death, and an attorney can help them prove that they acted in good faith while you did not.

Insurers do their best to insure you with the coverage you deserve based on the information they know about you. This information comes from different sources, such as answers you provide on your application regarding debts, education, lifestyle and even credit checks. Some insurers are even turning to social media, such as Facebook, to verify your lifestyle before insuring or quoting premiums.

The bottom line is that if you are dependent on an insurance policy for financial security for your family, be honest with your insurer. If you are an heir of an insured person, or an insurance company, and the other party has acted in bad faith concerning a policy, seeking legal assistance to mediate a resolution is your best bet.

Source: Bankrate.com, "Would a life insurance company like you on social media?," Crissinda Ponder, July 28, 2015

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