One financial analyst said some families' life insurance policies are woefully inadequate when it comes to protecting their loved ones from financial ruin after they pass away.
Writing for the Richmond Register in Kentucky, financial columnist Don McNay said he's actually purchased a number of different life insurance policies, each of which he has earmarked for a particular expense. For instance, one policy he's set aside will provide endowment funds and scholarships at his alma mater, while the rest of his policies are generally used to cover the various needs of his family when he is gone.
Additionally, McNay said consumers need to give more thought to options that allow the life insurance policy to be paid out over time, rather than in a lump sum. That could provide a more sustainable financial option, he said.
"When you hear that 90 percent of people who receive a lump sum will blow it in five years, some people conclude that life insurance is futile," he wrote, noting he's put his life insurance policy in the hands of a trust that will purchase annuities for his beneficiaries, which will be paid out for the rest of their lives.
Such alternative models of life insurance can be discussed directly with companies. Experts advise consumers evaluate their options when deciding how and when to pay out a policy.