Insurance Planning
Insurance Planning
KEY POINTS
- Mitigating Risk
- Wealth Building (Permanent Insurance)
- Life Insurance in Your Financial Plan
Mitigating Risk
Many times the primary purchase of a life insurance policy is to cover debts, such as your mortgage and car, as well as, final expenses in the event of a loss. This offers you protection from any future financial burdens. When selecting a policy, you potentially can have 30x-10x your income in coverage mitigating risks associated with any loss of income.
By having 30x-20x your income serves as income protection. Life insurance is about preserving what you're building right now at this very moment.
Imagine if you looked into the future and all of the money you potentially will earn in the next 30 years, envision it sitting right there for those who depend on you. Now that you are thinking of your future, there are a two types of life insurance policies you can choose from to mitigate any potential risks to your finances and those are term insurance and permanent insurance.
Determine Your Economic Life Value, or "ELV"
Your economic life value is the financial impact your family would feel in the event of the unexpected. Too many people purchase life insurance without really knowing whether the amount is truly enough for their family. Life insurance helps replace your financial contributions and enable your family to pursue their financial goals no matter what happens.
There are multiple ways to calculate your economic life value and below are the essential elements we consider when determining your benefits. Your "ELV" is the financial guideline to determining your face amount for a life insurance policy. During your meeting, we will review this concept for an accurate ELV.
OneAmerica describes it in further detail, click here.
Wealth Building (Permanent Only)
Life insurance in the financial industry is misinterpreted. The common theme is “Buy Term and Invest the Difference”. So as much as growth is desired and touted, and which we desire; yet, risk is an inevitable aspect that's overlooked. With life insurance properly designed, it affords you the ability for more guarantees later in life. It builds despite market volatility.
As financial professionals, any advisor/representative should be discussing insurance with you. If not, you ought to have a conversation. Without reducing your level of risk, there is potential to demolish your retirement savings in one unexpected circumstance. When we talk about about wealth building, we mean is money over time.
Beyond risk, are your future income distributions efficient? What we are saying here is–– when you liquidate the asset what are the tax consequences to you, are they burdensome and will this interfere with social security or medicare? And will you need to sell at a loss to have income in your retirement years, which happens when the markets are down. Reason being you can run into another risk called "sequence of returns".
From our work, efficiency can be a $50,000 difference in yearly income. See our case studies.
We can go further on this, when we explain our approach with Wealth Building Cornerstones.
Life Insurance in Your Financial Plan
Insurance planning is the first stage of any financial plan that will be created for you. Insurance planning looks at ALL of the potential risks to your income, therefore, the foundation to stability.
"Whenever we're afraid, it's because we don't know enough. If we understood enough, we would never be afraid."