Archives For Life Insurance

5 Questions about life ins TB

 

As we approach Life Insurance Awareness Month in September (Yes, and only financial geeks like me know that September is LI Awareness Month), I thought I would provide some framework for you to re-think or examine your own life insurance plans.

Life Insurance can be confusing. Not to mention the pressure of an agent trying to get you to make a purchase…… any purchase. So, as you consider your own life insurance plan here are 5 questions that you should ask regarding yourself regarding your personal policy. If these questions can’t be answered or aren’t answered satisfactorily then you should consult an experienced financial planner to ensure that your plan is a fit for your family and your personal situation.

 

1) Do I have the right amount of coverage?

 

We believe that each person should have their Full Economic Value in life insurance Death Benefit. The calculation to determine your Economic Value is:

Your Annual Income  X   # of working years remaining   =   Your Economic Value

This may vary as you approach retirement. At retirement point the death benefit should equal your estate size. Other planning caveats are for non-working spouses (all spouses work however all do not receive an outside paycheck for their hard work). In this scenario, consider the cost to hire someone to perform the duties they perform as the appropriate amount.

 

2) Will my insurance expire without value?

 

Some types of coverage like term coverage are designed to end without value regardless of whether the insured is still alive. Other types can lose value and leave a large surprise to the insured when they realize that they have paid in to a plan that is being canceled or needs unexpected additional funding.

 

3) Is my life insurance coordinated with my retirement plan?

 

This one can get tricky. In order to receive the highest amount of retirement income it is wise to create a coordinated retirement and life insurance plan. This coordination will allow for income to be received with the best possible tax treatment without fear of running out of money during retirement. This level of coordination is best designed with your financial planner who is well versed in retirement and insurance planning.

 

4) Does my life insurance have a clause for Disability?

 

Many insurance agents often overlook this feature in their zeal to make a sale. An educated consumer will always want a life insurance plan that protects them from disability. This means that if the insured were to become sick, hurt or unable to work the insurance premiums would be made on their behalf by the insurance company. This isn’t a reason to not own proper disability insurance, but simply helps to make sure that life insurance premiums do not have to cut due to the loss of income or additional expenses of a disability.

 

5) Does my life insurance have living benefits? Specifically benefits like Long Term Care or Chronic Illness benefits.

 

These are features within life insurance policies are newer to the market place and all companies have not adopted them at this point. However, I personally wouldn’t recommend a policy without them in today’s market place. Including these benefits can often times be added with little or no additional premium and potentially save big money down the road.  It is often advisable to choose multiple policies with and without this feature due to how they are treated when/if they are ever utilized for this purpose. This feature can be added to many term or permanent policies.

 

Hopefully these questions have provided the framework for you to begin examining your own life insurance strategy. As you can see life insurance is an integral part of any financial plan. It is advisable to work with a professional to determine the appropriate approach for you and your family. Be careful when talking to an insurance agent who only works for one company or doesn’t specialize in coordinating this with a financial plan. They may be limited by the choices which they can offer.

 

If we can help with this conversation or if you simply want to learn more about Drive Planning connect with us on-line or in person.

Call or Text me at 404-429-4132 or connect on-line with me via Twitter, LinkedIn or Facebook

Are You Ready Name and logo ad

 

 

Ready for what you may ask……

 

The short answer is for whatever comes next. Regardless if it is positive or negative, do you have your house in order? Recent events both globally and locally have emphasized the harsh truth that most people do not. For most of us the busy nature of life seems to be a roadblock standing in the way of preparation. A lack of money is often used as an excuse for not taking care of the items which we know to be important. So, what are these items which are so important to have in place?

 

When tragedy strikes it typically exacerbates when someone is ill prepared. However, there are times when positive events can occur and we are totally caught off guard. For example, I have seen small companies get approached by larger corporations to be purchased. As much as that sounds like a dream come true for a business owner; the smaller company, with poorly organized records and bookkeeping, wasn’t prepared to demonstrate their value. In this example being ill prepared resulted in a missed opportunity.

 

On a smaller scale, I have seen opportunities missed to invest, take a fun trip, take advantage of a good which have been missed due to a lack of liquid money available. Placing your savings or investments into plans which are restrictive can sometimes result in missed opportunities. Obviously NOT saving at all will likely create a poor result as well.

 

Upon the death of Prince many people have begun to speculate about the value of his estate and how it will be distributed. Early indication/speculation is that like so many celebrities there were no definitive plans in place. According to LexisNexis, 55 % of adults in America do not have a will. So, while Prince was an exceptional artist he was totally normal as it relates to his efforts in planning.  Being prepared is something that you address now. Age isn’t a determining factor regarding preparation. Recently, I have personally experienced several deaths close to me of which the oldest was 41 years of age. Clearly money in Prince’s case wasn’t the driving factor, so it must have simply been a feeling of I’ll get to it later.

 

The last 20 years of my career has been dedicated to assisting individuals and businesses with their preparedness. Being Ready brings a great sense of relief to you and your family. It isn’t only about preparing for the worst, it is also preparing for the best times.

 

 

 

are you ready tweet 2

 

 

Here is a list of the items we assist with to help our clients Be Ready:

 

Areas to Plan DP

 

We have the tools in place to ensure that You Are Ready. Our clients enjoy The Protection Savings and Growth Model and The Drive Planning Financial Dashboard. Take two minutes to view our short Video, Life In A Box, which explains The Financial Dashboard.

 

Whatever you do…. take the time to Be Ready! If you have any comments or questions please reach out to me directly or connect on-line via Facebook, LinkedIn or twitter.

 

 

 

life insurance imageIn my role as a Consultant with DDS Financial I have been conducting Life Insurance Audits, now a routine part of the firms practice. There have been a number of mistakes that the Audit process has brought to light and that we have since corrected. There are 3 most commonly made mistakes that I wanted to highlight so that you may be spurred to take action and engage in a Life Insurance Audit.

The Wrong Amount of Insurance

Insurance Agents are often accused of overselling or encouraging more coverage than people feel that they need. So it begs the question, what is the right amount of Life Insurance? There is a simple answer to a question that seems to bewilder many advisors; insure something for what it is worth. So as to not debate the value of a human life we should consider the Economic Value that someone has to the ones that they love. There are calculators that can assist in this measure, but for a good rule of thumb consider:

  • A person between ages 25 and 45 should have 20 to 30 times their income.
  • A person between ages 45 and 55 should have 15 times their income.
  • A person between ages 55 to 60 should own 10 times their income.
  • Someone in retirement should have an amount equal to their assets.

Style

Many of the individuals that I have seen lately have missed this in a major way. There are basically two broad categories in the style or type of Life Insurance that exist.

  • Term – As the name indicates, this insures you for a term or period of time and will then expire without value at the end of the term.
  • Permanent – As the name indicates, this insures you for your entire life. It lasts as long as you do.

Again to not be accused of oversimplifying there are many nuances to each of these that should be considered. One of the newest and most attractive features are living benefits that pay for Long Term Care coverage should it be needed during life.

It seems that the lure of a low cost term insurance has caused many to not consider the ramifications of entering into retirement without life insurance coverage. The ramifications typically result in a lower retirement income or withdrawal rate from retirement plans…. Not fun and often can’t be reversed if you wait to late! At the very least going through life with term insurance only can result in a loss of security and financial flexibility.

Beneficiary Designation

The mistakes that are made with Beneficiary Designations are subtle but can potentially have major ramifications. Insurance Agents are often in the role of a salesperson and not that of an advisor or planner. This sometimes causes a lack of coordination between beneficiary designations and wills and or trusts. In full disclosure, I am not an attorney and yours should be consulted when reviewing your beneficiary designations. The most common mistake that I see here is when a married person names their spouse as the primary beneficiary or a parent/grandparent names a minor/young adult. You may say, “What’s wrong with that?” Potentially nothing, but properly structured testamentary trusts with the surviving spouse/child as the beneficiary gives greater protection for he/she actually getting the proceeds that were intended for them. This proper wording can provide a layer of protection against litigation, maybe even future spouses etc. Bottom line is that you should pay close attention to your beneficiary designations!

These 3 Mistakes in Life Insurance: 1) the wrong amount of coverage. 2) the wrong type of coverage and 3) improper beneficiaries were the three that were most commonly found problems in our recent Audits. There were many other errors and oversights that surfaced.

Take the time to have your policies reviewed so that you have a greater peace of mind. Contact me to set up a free consultation.