It’s Life Insurance Awareness Month


8 Reasons You Should Care

I have recently been seeing a lot of questions in the press and hearing from client’s questions about life insurance. Since it is life insurance awareness month, I thought I would devote several blog entries to the topic of life insurance since it is a subject that is often misunderstood and overlooked.

Almost 25 years ago, one of my mentors suggested to me that if I wanted to help people create a solid financial plan, a proper life insurance portfolio needed to be at the core of their holdings. I challenged that notion, after all it was 1990 and I was in the 3rd year of my financial planning career. Back then the stock market was taking off, dot coms were the rage and everyone was making easy money in the market. All the pundits declared, “This time is different, the market can rise forever!” Folks back then scoffed at any strategy that built money on a steady, consistent basis. After all, it was easy to earn 15, 25 even 100 percent returns on tech stocks.

Since hindsight is 20/20 and people now know that those rates of return are not sustainable, and steady asset growth remains an “all weather” strategy, I want to introduce the 8 elements that, according to that  mentor, make up the ideal financial plan:

  1. Cash Flow; there must be a mechanism available to get money into your plan on a systematic basis.
  2. Guaranteed Returns on your investment; when money is in your plan it needs to grow.
  3. Liquidity; can you access your money at any time you need it? You never know when an emergency or opportunity will arise, will you have the access you need in order to successfully deal with the situation?
  4. Minimize Taxes; as we grow wealth, taxes can take a huge toll on net overall returns.
  5.  Minimum taxes on distributions; not only do we want to avoid taxes on the growth of our investments, but on the distributions as well. Taxation can dramatically reduce net spendable income. After all, it’s not what you earn it’s what you keep!
  6. Ease of distribution; many wealth creation strategies carry penalties for early withdrawal. For example, pulling money out of an IRA or 401k can lead to penalties if done to soon (or too late).
  7. Flexibility to react to future changes; all we can be sure of is that things will change, will your plan be able to react to those changes in a way that will minimize damage or take advantage of opportunity?
  8. Minimize risk; while you can’t avoid risk altogether, does your plan include features that reduce risk, while still allowing for financial growth?

As you read the list, were there any of these elements you wouldn’t want in your financial plan?

These characteristics can virtually guarantee future success for your financial plan. Are all of them in place as part of your planning?  

As you read through the list, did any single product or strategy come to mind that included all of these characteristics? There is only one I can think of and that is Permanent Life Insurance! As an asset class, it is often overlooked, as a financial tool, it is usually misunderstood. I would encourage you to look into options for integrating life insurance into your planning. When properly done, the value of many asset classes can be enhanced, from stocks and bonds to real estate, life insurance is a tool that can reduce volatility and enhance returns when properly used. It also will protect those who depend on you!

If you would like to learn more about how properly structured life insurance can enhance your financial well-being, contact us and we can arrange a complimentary consultation to discuss your situation.

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