Archives For Life Insurance

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.

 

Three Legged Stool GraphicMost people are looking for a Lazy Boy when they think of retirement; that comes later! While planning for retirement I like taking the three legged stool approach.  There is a time and place for getting into the complexities but first consider simplicity. Providing for an income, healthcare costs and leaving a legacy. This three pronged approach will reduce a lot of the stress if you are wondering whether you have covered all the bases in retirement planning.

 

 

 

Lifetime Income

Numerous surveys of retired people indicate that their number one concern is running out of money. So it makes sense that eliminating the number one concern will make for a more fulfilling retirement.  As we have discussed in other posts contractual wealth for at least a portion of your investments and properly structured growth vehicles is a good mix. This mix of investments and investment vehicles also allows for an income that will increase to keep pace with the rising costs of retirement living.

 

Long Term Care Benefits

This important leg of the stool protects the income that we discussed above from being eaten up by healthcare costs associated with an extended or chronic illness. The landscape for how to provide this protection is ever changing or even evolving. This evolution is due to the fact that our life expectancy is increasing, however our quality of life during that time really isn’t. So, planning ahead for this time can really protect your income and assets; ultimately your quality of life.

 

 

Legacy

I did all on my own, so they can do it all on their own!!! Have you ever heard anyone say that? Have you ever made that statement? Well I hear that all of the time from parents in the 30’s 40’s and sometimes 50’s; but rarely to never do you hear that from grandparents. Fact is that we change over time and often those who thought nothing about leaving a legacy begin wanting to leave their mark on their family or the world.  This isn’t just a pitch for life insurance, though that is a great tool; there are multiple ways to create a lasting legacy. Regardless of how you choose to create your impression the earlier you get started planning on it the better.

 

Don’t be the guy who is trying to prop up on a rickety stool. Create a solid foundation by addressing the three legged stool; because one day when you are reclined in your Lazy-Boy…..you’ll be glad that you did!

 

 

Looking For Change

September 25, 2013 — Leave a comment

Girl Holding PlantNo this isn’t the change that we continually hear discussed during elections….. This is the kind that is real, that really happens and makes a difference. The types of change that I look for are so BIG that it usually makes people stop and take notice, change directions and maybe even plan a new course for their lives.

Whenever people experience life changing events they will often times seek out someone like me, a Financial Consultant.  They are often seeking assistance in helping them to adapt their personal finances into this new way of life. Some of these most common life changing events that make people contact me are listed here:

Man holding stack of paperwork with hand on calculator with longWork Related

  • Loss of Job
  • Change in Benefits Programs
  • Awarded Stock Options
  • Received a Bonus or Pay Increase
  • Buying or Selling a Business

 

Family giving dog a bath.Family Related

  • Married
  • Divorced
  • Had a Child
  • Aging Parents
  • Health Change
  • Buying or Selling a Home

MC900438779Economic Related Change

  • Legal Changes
  • Stock Market Volatility
  • Estate Tax Changes
  • Real Estate Values Change

So I would ask you to assist me in being on the lookout for changes that occur in your friends lives. An introduction to someone who can help may be just what they needed.