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Health & Fitness

Life Insurance Planning: A Critical Part of Financial Planning

Joe Lucey gives a solid basis for the critical role of life insurance as part of a comprehensive financial plan.

It happened again. I was visiting with some prospective clients who had both recently retired and were looking for a second opinion on their current retirement planning. They had heard of Secured Retirement Advisors’ comprehensive three-step review process from another family that we have been helping for several years now. Like many families we serve, their primary retirement planning goal has never been to build a large legacy to pass on to their children one day, but instead to ensure that they have planned in such a way that they can maintain their existing standard of living and spending in confidence, knowing that their plan that will provide for themselves in retirement.

During each three-step review we concentrate on a family’s taxes, income and investments and examine how these areas coordinate with each other. It was during the portion of our consultation when we were examining their income planning that the topic of life insurance came up. The conversation went something like this:

Me: Do you have any existing life insurance policies?

Them: Yes, but only on Bob (Not his real name). We took it out years ago and really don’t recall the particulars about it.

Me: Well when you visit with your current advisor for your regular reviews, what have they shared?

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Them: Our current advisor only does investments, he doesn’t work with insurance.

Nothing gets me going on my soapbox faster than when I hear that another financial professional isn’t doing their job. While many financial professionals could argue that their main objective is creating wealth, I firmly believe that a financial professional’s responsibility should not begin or end there. Secured Retirement Advisors believes that 90% of our job is helping our clients avoid large losses. In the case above, if Bob dies before his wife, they will lose 40% of their income. Having a plan in place, whether life insurance or another planning option, is critical to ensuring both of them will be able to spend in confidence throughout both of their retirement years!  My biggest bone of contention is that, at some point in the planning process, every financial professional must have a conversation about life insurance with their clients.

A 2010 survey by Limra, a research organization, found the following:

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  • Over 1/3 of all U.S. Households have no life insurance.  This percentage is the highest in almost 50 years.
  • Over 50% of all households recognize that they need more life insurance.
  • Over 50% of U.S. Households said they would have immediate trouble meeting living expenses if a primary wage earner died. (Note: Over 1/3 said they would have trouble within 6 months).
  • Over 1/3 of U.S. Households rely on life insurance provided solely by an employer.
  • Over 85% of U.S. Households said they do not know where to seek help buying life insurance.

 

Clearly this study indicates that far too many families and their financial advisors are living without the much needed security that life insurance can provide. Today’s historically high percentage of families without life insurance is due to several factors such as:

  • Tightening household budgets
  • Loss of employer-provided coverage due to unemployment or retirement
  • Cutbacks from company benefits packages
  • Under-performing universal life policies

 

All families should review their life insurance needs on a regular basis. Life insurance is a necessary piece of a comprehensive financial plan.

In addition, life insurance costs have declined over the last few decades because life expectancies have increased. This creates a wonderful opportunity for many people to update policies already in place at lower costs or to increase benefits. This alone may be the biggest reason to have your current life insurance reviewed periodically.

If you would like a complementary “3 Step Review”, which includes a complete life insurance analysis and consultation of your own retirement plan, call Secured Retirement Advisors at 952-460-3260.

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