By Andrew Hatherley on Jan 1, 2019
If you are like many working age adults chances are good that you own some kind of life insurance policy, but the real question isn’t whether or not you are insured; the real question is whether you simply own a life insurance policy versus having a real plan for your family’s life insurance needs.
Starting with the end in mind
Of course most of us approach planning for life insurance in a way that is psychologically different from other kinds of investments. After all, planning for a long term investment need that is met with stocks and bonds is much more fun to imagine than planning for our own possible mortality. Yet planning for what happens financially if (or when) we die is every bit as important to the people we leave behind as is planning for a long life of prosperity.
What are your goals for life insurance?
A meaningful conversation around life insurance planning starts with your goals. Addressing and understanding the question of “why life insurance” is a great first step. For some, life insurance is as simple and straightforward as replacing an income stream that suddenly disappears. In other cases life insurance can act as a form of continuity planning, allowing an estate or family business to pass intact from one generation to the next. Oftentimes this goals conversation extends beyond simple insurance policies and takes on a more comprehensive planning characteristic, particularly for high net worth individuals or families with complex needs. Incorporating your current assets, income, liabilities (mortgages and business loans) and any future needs such as college expenses into the conversation allows for a more complete understanding of how insurance can de-risk family finances.
Evaluating the current insurance portfolio
With this goals conversation complete your advisor can better review your existing life insurance policy portfolio and, when necessary, recommend enhancements to address any gaps or deficiencies in coverage. Oftentimes legacy policies were acquired at a different life stage and don’t accurately reflect current or future financial needs.
Executing and reviewing the plan
With your goals clearly understood and your current portfolio thoroughly evaluated your advisor can propose and implement a comprehensive life insurance plan. It is possible to save both time and money by working with an advisor who has already conducted thorough due-diligence on the life insurance marketplace, allowing them to recommend efficient solutions from the most reputable and stable insurers available.
Putting the plan to work isn’t the end of the life insurance journey. Like any good plan a life insurance strategy will require professional monitoring and changes over time to account for shifts in personal circumstances. Life happens; marriages begin and end, children and grandchildren are born, and houses are bought and sold, all of which have implications for life insurance planning. In addition to changes in our personal lives the life insurance products available are constantly evolving, meaning that ongoing due diligence is necessary to make sure the most appropriate solutions are being used to meet your insurance needs.
This sounds complicated – can’t it wait?
Fortunately getting started on life insurance planning doesn’t have to be complex or time consuming. While planning with the end in mind may sound unpleasant it need not be alarming. The peace of mind that comes from working with a professional advisor and putting a plan in place can be quite liberating, and when combined with the benefits of protecting what matters most there is every reason to start today.
Life insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.
All life insurance guarantees are based on the claims paying ability of the issuing company.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.