Your Money or Your Life!

That ‘thug’ request used in old movies, “give me your money or your life” makes me laugh.  What if you told the thug that all your money is tied up in life insurance, and that he’d have to take your life to get your money?  On second thought, he’d probably do the crime for your life insurance proceeds—so forget that idea.  I’ll think of a better response and get back to you!

Do you have Life Insurance?  Do you need it?  What kind do you need?  These are very basic questions that most people don’t know the answer to.  That’s because choosing the right life insurance strategy for you and your family takes a little more planning than punching arbitrary numbers into a life insurance web site.

These days, life insurance can be used to cover a key person in a company, a “buy-out” upon the death of a business partner, head of household income replacement, an alternative potentially tax-free savings vehicle, leverage against estate taxes, and many more reasons.  The conversation doesn’t have to be a grim planning process when talking about your options.  The more you understand about how it works and how it can benefit you and your survivors, the more apt you are to apply for and get a solid policy in place to protect yours and your family’s interests.

Typically, your specific insurance premium is based on your health, age, and benefit amount.  While most applicants will not qualify for the absolute best rating (a young super athlete like Michael Phelps), there are insurance carriers that are more lenient towards different conditions.  Tobacco users, overweight, medical conditions, and risky behavior are major factors, to be sure.  However, it may be possible to place someone with all these aforementioned conditions at a better than standard rating.  Yes, you read that correctly…one person with all those could be rated better than standard!  And once you get insurance, the premium will never change over the term of the policy—regardless of your conditions later on.

And why stop at life insurance when you can also have disability insurance.  This type of insurance covers you (and your family) should something preclude you from working at your job.  Once a waiting period is satisfied (typically 90-days) you could start receiving a tax-free benefit equaling 60% of your working salary.  And this income could continue until a normal retirement age of 65, 67, or even 70-years old.  The benefit could literally be greater than $1,000,000 over a long time frame.  Compared to your home, your car, and your retirement account(s), your lifetime income potential is probably the largest asset you have…and yet, it’s probably the only one of these assets that’s NOT insured!!

How about Long-Term Care Insurance?  Who’s going to take care of you when you are aging gracefully into your 80’s, 90’s, or 100’s, and can’t quite do everything you need to do to stay in your home?  Do you want to end up in a convalescent home where you share a room with 3-other people—your only privacy being that of a curtain?  Dignity is something we all deserve.  And with proper planning, you may be able to afford home health care and receive assistance with your day-to-day tasks at home (assuming you’re not relying on your children to take care of you while they try to live their own lives).  The cost of home health care can exceed $80,000/year in California.  And there is no option of taking out a line of credit, getting a job, or having the state or federal government pay for it when you aren’t working.

Finally, I am not trying to convince you that you ‘need’ any of the above mentioned insurance types.  When I meet with my clients and provide a little education on insurance, any ‘need’ will surface and reveal a potential hole in your financial plan.  It is then my job to help make sure you’re doing the best thing for your particular situation.

Since September is life insurance awareness month, one of our general agencies has put together a few client approved videos (also available on YouTube) explaining how life insurance affected or changed their lives.  If you would like to see these or get more information, contact my office.