LIFE INSURANCE – ARE YOU PROTECTED?
In our experience, when people think of financial advisors, they typically think that we only help our clients with investing and planning for retirement. Although we enjoy helping our clients manage their wealth and plan for their future, we are not doing our job if we do not address ways to mitigate risk to their assets, families, and earning potential.
Think about your family. If you were to pass away today, would your family be able to maintain their current lifestyle? The answer for most people is no. We mainly suggest that our clients buy life insurance to take care of their loved ones should something happen to them. Life insurance proceeds can help pay off a mortgage, help your kids through school, or can simply leave a legacy.
Since we practice comprehensive wealth management, we make it part of our routine to examine clients’ life insurance coverage. Common things that we discover during our analysis include:
How much life insurance do you need?
As a general rule, most people need somewhere between 7 to 10 times their annual salary in life insurance, but our team does not like to operate off of general guidelines. Some people do not need any life insurance at all, while some may need much higher levels of coverage. The amount of life insurance should be based off of a needs analysis that we would discuss while developing their overall financial plan.
It’s important to note that the ability to receive life insurance coverage, and the rate that you are given, is all subject to underwriting.
What type of life insurance should you buy?
There are two main categories of life insurance: term insurance and permanent insurance. Term insurance is meant to insure your needs over a specific period of time. This can work well for protecting your family while you have a mortgage or while you have kids at home. The benefit to term insurance is that it is the most cost-efficient type of life insurance available. The cost effectiveness allows people to pay down debt and/or save and invest additional money toward their future.
The second category of life insurance is permanent insurance and can be further broken down into the categories of Whole Life and Universal Life Insurance. For the purpose of this article, we will focus on the broad category of permanent life insurance. Individuals would typically purchase permanent insurance for certain estate planning needs or if they had a permanent need for the death benefit. It also has the potential to accumulate cash value within the policy that a client may access while they are alive. The cost for permanent insurance is typically much more expensive than term insurance.
Just like the amount of coverage, the type of policy should also be driven by a client’s needs and goals. We believe that term life insurance is more appropriate for most people, and the reality is that most people do not have a permanent need for life insurance coverage. By the time they get to retirement, they typically have their mortgage and other debts paid off, their kids have graduated college, and they have accumulated enough money to comfortably maintain their lifestyle. In our mind, it is not appropriate to continue to pay for the cost of insurance when there no longer is a need. Yes, you have the ability to accumulate cash value in permanent life insurance, but for most people, there are better ways to save and accumulate their wealth.
It’s always important to shop around for any type of insurance product before choosing. At Stifel, we have access to many highly rated insurance carriers, which allows us to shop around on behalf of our clients. When we shop around, we not only compare different products, but also different carriers for our clients when determining what will help them pursue their goals.
If you would like a complimentary review of your life insurance and how it fits into your overall financial plan, we would love the opportunity to help you.
Think about your family. If you were to pass away today, would your family be able to maintain their current lifestyle? The answer for most people is no. We mainly suggest that our clients buy life insurance to take care of their loved ones should something happen to them. Life insurance proceeds can help pay off a mortgage, help your kids through school, or can simply leave a legacy.
Since we practice comprehensive wealth management, we make it part of our routine to examine clients’ life insurance coverage. Common things that we discover during our analysis include:
- There is not enough coverage or too much coverage.
- The product is an inappropriate type of product for the client’s needs.
- The product is not working like it was supposed to.
- There are more cost-effective providers/products available.
- The product doesn’t fit the client’s financial plan.
How much life insurance do you need?
As a general rule, most people need somewhere between 7 to 10 times their annual salary in life insurance, but our team does not like to operate off of general guidelines. Some people do not need any life insurance at all, while some may need much higher levels of coverage. The amount of life insurance should be based off of a needs analysis that we would discuss while developing their overall financial plan.
It’s important to note that the ability to receive life insurance coverage, and the rate that you are given, is all subject to underwriting.
What type of life insurance should you buy?
There are two main categories of life insurance: term insurance and permanent insurance. Term insurance is meant to insure your needs over a specific period of time. This can work well for protecting your family while you have a mortgage or while you have kids at home. The benefit to term insurance is that it is the most cost-efficient type of life insurance available. The cost effectiveness allows people to pay down debt and/or save and invest additional money toward their future.
The second category of life insurance is permanent insurance and can be further broken down into the categories of Whole Life and Universal Life Insurance. For the purpose of this article, we will focus on the broad category of permanent life insurance. Individuals would typically purchase permanent insurance for certain estate planning needs or if they had a permanent need for the death benefit. It also has the potential to accumulate cash value within the policy that a client may access while they are alive. The cost for permanent insurance is typically much more expensive than term insurance.
Just like the amount of coverage, the type of policy should also be driven by a client’s needs and goals. We believe that term life insurance is more appropriate for most people, and the reality is that most people do not have a permanent need for life insurance coverage. By the time they get to retirement, they typically have their mortgage and other debts paid off, their kids have graduated college, and they have accumulated enough money to comfortably maintain their lifestyle. In our mind, it is not appropriate to continue to pay for the cost of insurance when there no longer is a need. Yes, you have the ability to accumulate cash value in permanent life insurance, but for most people, there are better ways to save and accumulate their wealth.
It’s always important to shop around for any type of insurance product before choosing. At Stifel, we have access to many highly rated insurance carriers, which allows us to shop around on behalf of our clients. When we shop around, we not only compare different products, but also different carriers for our clients when determining what will help them pursue their goals.
If you would like a complimentary review of your life insurance and how it fits into your overall financial plan, we would love the opportunity to help you.