Recent studies show that life insurance ownership is at a 35-year low with only 44% of US households owning some form of life insurance.* That statistic likely reflects the fact that families feel the need to drop their insurance coverage ahead of other items when times get tough. People need to understand that life insurance isn’t strictly a luxurious method used by wealthy people to pass funds along to the next generation. Rather, it’s a strategy employed to avoid potentially awful scenarios in which the loss of a loved one results in financial hardship for others. Even a basic, inexpensive term policy can help avoid such a situation from ever taking place. As a comprehensive wealth manager, I plan to go over my clients life insurance coverage in more detail during 2013. Most people are primarily concerned with the management of their investments but not with potential risk exposures in the form of lost income/wages and what coverage should be in place to minimize that risk. More on this below…
Some people avoid the process because they know it involves time, energy and effort to research, purchase and get a policy issued. Insurance transactions definitely take time (generally 8-16 weeks) as the insurance company needs to do proper diligence. That should be expected and is actually a good thing for all parties involved. By properly assessing the insured’s health and medical history, the insurance company can determine premiums which make sense and will keep the company in business and able to issue new policies and pay out benefits for decades into the future.
The health review portion is not actually all that bad. A paramed exam is generally required in which a doctor will visit your home or office and collect a blood and urine sample, take your blood pressure and ask you a bunch of questions about your medical history. Not being 100% healthy doesn’t mean you’ll be denied a policy, it just means your premium may be a bit higher. The paramed generally takes 30 minutes or less and isn’t painful. In fact, I’ve had a few clients who appreciate getting the paramed because they otherwise haven’t been to a doctor in the past few years and this way they get a free physical.
In terms of products, your choice is not simply term vs. whole-life any more. The insurance product lineup has gotten pretty good over the past decade. There are many difference types of life insurance which are now available that offer flexible premiums, flexible death benefits, etc, so that access to insurance is greater for people who need it and the risk of losing it because of a missed premium can be minimized. Also, life insurance has evolved into much more than just death benefit protection. Because the cash value of insurance policies accumulates on a tax-deferred basis, many people fund these policies for supplemental retirement income and to cover estate tax needs.
If you have questions about life insurance and think it may be something useful within your estate plan, give me a ring. I’d be happy to talk more about this.
Premier Financial Advisors, Inc
14 E 60th Street, #402
New York, NY 10022
P: 212-752-4343 *231
Securities and certain investment advisory services offered through: First Allied Securities, Inc., a registered Broker/Dealer. Member: FINRA/SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.
*Life Insurance Marketing and Reserach Association (LIMRA) – Quoted in ‘Competitive Edge” magazine – Q4, 2012