Why Buy Life Insurance?
The Purpose of Life Insurance
Life insurance is a risk management tool. Its purpose is no different than liability insurance or hazard insurance. You probably wouldn’t think of dropping your car insurance just because your car has airbags, or homeowner’s insurance now that you've got an alarm system. Most people wouldn’t think of self-insuring those risks, either. Why then, would you think it advisable to self-insure – or, worse, not insure – what you hold dearest: the future well-being of your family, the business you built from the ground up or your legacy?
Would you ignore any of the following needs?
- The income needs of your spouse and children
- The need to pay off debt so that your spouse and children can maintain their standard of living
- The costs of college education for your children (or grandchildren)
- The needs of a special needs child or parent who is dependent on you for care
- The costs associated with the loss of a key person, partner or business associate
- The need to retain, recruit and reward talented employees and possible successors
- The need to avoid a fire sale of a business, real estate or other illiquid assets
- The need to properly effect a buy/sell or business succession plan
- The desire to treat your children fairly in the context of a family business or mixed family
- The need to preserve and protect your family homestead, treasured vacation home or land for future generations
Life insurance is the only asset that provides the necessary liquidity to cover the risks behind these concerns and needs, as well as many others. With life insurance, the funds are there when needed and there is no timing risk or liquidity risk.
To find out more about what your life insurance needs may be and the many kinds of life insurance available to meet those needs, call us for a consultation.
Life Insurance Policy Review
Why You Need to Evaluate Your Existing Life Insurance
Chances are, your life has changed since you last purchased life insurance. The insurance industry has undergone dramatic changes, and interest rates have decreased.
If you haven't taken a good look at your life insurance policies lately, you might be missing out on essential information about the performance of your policies and possible gains resulting from more current, cost-effective coverage.
A Policy Review is a critical component of a sound financial planning strategy. It begins with some basic questions:
• Is your existing life insurance policy providing adequate coverage?
• Have the needs that prompted the purchase of your existing life insurance policy changed?
• How is your policy performing relative to its original objective?
• Is it on track to meet intended goals?
• Are your insurance products among the most competitive and cost-effective on the market today?
What is a Policy Review?
The objective of a Policy Review is to ensure that your life insurance coverage is in alignment with your current financial needs. It takes into account personally owned contracts, trust owned contracts and employer provided benefits to provide you with an assessment of the adequacy of your coverage.
We have seen significant changes within the life insurance industry in recent years, this is a good time to review your life insurance policies to help ensure that you are getting the most benefit possible out of your life insurance coverage and that you have the appropriate life insurance to meet your specific needs. Over the past decade, life insurance products have advanced considerably. A Policy Review helps ensure that your life insurance policy meets your needs today.
We can provide you with a thorough explanation of how your policy has performed, projected cash values at designated intervals, and an assessment about the number of years that the policy will remain in force based on current assumptions. In cases where there is a clear advantage, we will also provide you with information on alternative policies.
What Factors Into the Evaluation?
Your Current Situation
• Have there been significant changes in your family life? Have you gotten married, divorced, or added another member to your family?
• Do you now have grandchildren who you would like to provide for?
• Has there been a change in your employer-sponsored benefits?
• Has your net worth increased or decreased significantly?
• Are you planning to fund a child's college education?
• Is your retirement plan adequate to fund your future?
The Status of Your Coverage and Your Carriers
• Are your policies performing as projected?
• Have there been changes in the rating of your life insurance policy's carrier?
• Are there newer insurance products that are more cost efficient or that offer better guarantees*?
• Could you benefit from new riders that offer more appropriate features such as return of premium or guaranteed death benefit protection*?
• Does term insurance coverage meet your longer-term needs?
• Is your policy's premium scheduled for a significant jump?
Why Would I Exchange an Old Policy for a New Policy?
Lower costs. In many cases, newer policies have lower cost structures than policies issued as recently as two or three years ago.
Carriers' financial status. If the financial stability of a carrier changes, it's often advisable to switch to a financially sound company.
Health changes. Improvements in health that affect the underlying policy cost.
Underwriting issues. New underwriting programs could reduce a policy's mortality costs or eliminate undesirable ratings.
There are considerable issues that need to be considered before replacing life insurance such as, but not limited to; commissions, fees, expenses, surrender charges, premiums, and new contestability period. There may also be unfavorable tax consequences caused by surrendering an existing policy, such as a potential tax on outstanding policy loans. Please discuss your situation with your financial advisor.
* Payments of guaranteed principal and income, as well as living and death benefit guarantees are contingent upon the claims-paying ability of the issuing company. Optional living and death benefits are available for an additional fee and may not be available in all states.