Approach and Purpose of Life Insurance
Life insurance is to protect against the loss of life value. This includes replacing income that would be lost to your family, or replacing Social Security or other benefits. The greatest present value of income, then, is at an early age. Your need for income replacement declines as you get older and have fewer remaining years of income ahead of you.
We also use life insurance for business purposes. This can include Buy/Sell agreements for business partners, key person insurance, and for liquidity purposes for owners. Life insurance can be part of your benefits program and executive compensation.
Some families will want life insurance to reduce taxes. Your heirs will have to pay income taxes on your retirement accounts, and the Stretch IRA has been eliminated for 2020 forward. If they instead receive life insurance proceeds, those death benefits will be received TAX-FREE! Life insurance can also help families who might be subject to the Estate Tax or the Generation Skipping Transfer Tax. An insurance policy can help families with Charitable Giving objectives and those who need to fund a Special Needs Trust.
For Individuals and Families
For young families, the primary purpose of life insurance is income replacement. This need declines as you get older. You have a smaller amount of future earnings to replace, and also you have smaller future expenses as you will have already paid for a house, college educations, etc. If this situation applies to your family, you should consider Term Insurance and invest the difference.
Some families do need to have permanent insurance. If you have Estate Planning goals, a Special Needs Trust, or want to reduce taxes, a permanent insurance policy may make sense for you.
For Advisors
Your clients need life insurance and you have a chance to add value to their planning by using me as your outside expert. They trust you to guide them and most of your clients simply aren’t ever going to get the life insurance they need without your guidance and encouragement. This can be a great way to deepen your relationship with clients. I’d love to discuss how we could work together. Are you a:
- Fee-Only Financial Advisor or CFPⓇ
- Registered Investment Advisor
- Accountant, Tax Preparer, or CPA
- Business Attorney
- Estate Planning Attorney
- Family Law Attorney dealing with Divorces, or Special Needs
My goal is to make you look good to your clients and to make the life insurance process as easy and painless as possible. If you are a Fiduciary, you can appreciate getting advice from someone who is independent and also a Fiduciary. Here are some situations where I could help:
- Your clients are young professionals, are recently married, or have children. Let’s look at an affordable Term Life plan.
- Your clients were sold an insurance policy a few years ago and it’s not right for their needs. Let’s fix that and find the right solution.
- Your clients have had a whole life policy for many years and it has significant cash value. Let’s do a policy review and see if there is a better way to use their cash value.
- Your client owns a business with other people. What will happen to the business and the families if one of the owners were to unexpectedly pass away? What have you done to shield them from that possibility?
- Your client wants to leave assets to their spouse, children, grandchildren, or charity in the most tax efficient way possible.
- Your client has saved very well, has more than they need, and want to maximize their bequests.
- Your client has an existing insurance or annuity policy but should be looking for a policy which includes Long-Term Care benefits.
- Your client has a child or grandchild with Special Needs.