How to Talk to Loved Ones About Your Life Insurance Plan

If you've been putting off a talk about your life insurance, this guide will help you approach it with clarity, empathy and confidence.

Why this conversation matters 

If you're married, have children or care for other dependents, it’s likely that people rely on you for financial support. If something were to happen to you, your loved ones might not know where to get money to pay for household expenses, causing stress and anxiety. 

Knowing there's a life insurance policy in place can assist your loved ones in the following ways: 

It can provide peace of mind

If you were to die unexpectedly, not only would your loved ones have to deal with their grief, but also with practical concerns like how to pay the mortgage or a child's college tuition. Knowing that a life insurance policy exists can lessen those concerns because it will deliver funds to provide for your family's future. 

It helps avoid confusion and stress later

When someone dies, the first few days, weeks or even months can be a confusing blur of tasks and obligations. Making final arrangements, navigating wills and sorting through essential documents can be stressful and overwhelming. 

Knowing what policy is in place, what the death benefit is and who the life insurance beneficiaries are can reduce some of that stress. That can allow your family to focus on recovering from their grief and moving forward.

When to start the conversation

There's no "perfect" time to have a conversation about life insurance. But there are some key moments that give you a good opportunity to raise the subject: 

During major life events

Major life events such as marriage, the birth or adoption of a child, or the purchase of a home make significant changes to your family’s financial situation. As such, a family gathering after the event can be a great time to sit down and discuss life insurance in the context of the recent development. 

As part of proactive planning 

If there hasn't been a major life event, you can introduce a conversation about life insurance into general discussion about managing your finances or planning your estate. Framing the conversation as part of a broader plan to carry out your financial goals can position the life insurance component of it in a proactive and positive context. 

How to prepare for the conversation

There's no way around it: Talking about life insurance means talking about what happens if you die, which can stir up emotions and worries. To prepare for the conversation, use these tips: 

• Choose the right time and setting: You don't want to rush this conversation; it's too important. Pick a time when everyone involved can attend and isn’t pressed by other obligations. A private, quiet place, like around your kitchen table or in your living room, is an ideal setting. 
• Get organized: Before your loved ones arrive, collect key information like the names of your life insurance company and your insurance agent, since your beneficiaries will need to contact this company or agent in the event of your death to find out what they need to do next. You should also have on hand details about your beneficiaries and the death benefit amount. 
• Be compassionate and open: Reassure your loved ones that your life insurance policy is just a precautionary measure and a proactive step to protect them against the unknown. Let your loved ones ask questions, and be patient if they need to take a break and come back to the subject afterward.

What to share with your loved ones

Life insurance policies can be complicated. Don’t overwhelm your audience with too much information. Instead, focus on the essentials. Start by sharing the kind of policy you have – term life or whole life – and explain what the type means. 

During the remainder of the conversation, cover the following essentials. Be patient and open to questions. 

Beneficiaries and coverage amounts

Explain the amount of the policy death benefit, and who is listed as the beneficiary  or beneficiaries on the policy, along with why you chose them. Having this discussion can prevent confusion or disagreements between your loved ones after your death. If you have minor children, you may choose to name them as a beneficiary with a named custodian, or you may name another adult as the named beneficiary. 

Talk about how the death benefit can help your family members. Discuss the size of the payout in the context of what it could accomplish, such as paying off the remaining mortgage balance, covering the cost of assisted living for an ailing relative or paying for a child's college education. Detail the policy’s death benefit and who will receive the funds. 

Also, tell your loved ones what company issued the policy and, if applicable, the name and contact information of the insurance agent you worked with when you purchased the policy. 

[Tip to survivors: If you're not sure who a loved one’s life insurance provider is, the National Association of Insurance Commissioners (NAIC) has a life insurance policy locator tool that can help you locate existing policies based on your loved one's date of birth and Social Security number.]

How the payout works

The designated beneficiary is the person who will receive the death benefit payout, so tell them how to submit a claim. Typically, they’ll have to submit a copy of the death certificate during the claim process.

Also explain how the benefit is paid . While most death benefits are distributed as lump-sum payments, some insurance companies offer the option of an annuity, which means the beneficiary receives payments over time. 

If you have whole life insurance, the policy may have accumulated a cash value. Explain what the cash value is, and if any or all of it has been used. For example, you may have borrowed against it to pay for your child's education or withdrawn a portion to cover your policy premium payments. If you’ve tapped the cash value portion of a whole life policy, explain to your loved ones that this may reduce the death benefit they receive.