A thorough understanding of the financial and life goals within a family help determine the best life insurance solution or solutions to meet those objectives. Term insurance can fulfill a broad spectrum of family requirements. A young family may have a limited budget, but have great need, such as young children to raise and send to college.
Term coverage for 20 or 30 years can be just the right fit as an income-replacement vehicle. A major consideration with term coverage is the ability to convert some or all of the coverage to a permanent solution, whether it seems necessary or not at the time of application.
The worst news is to find out 16 or 18 years into the policy that the insured is either no longer insurable or unable to obtain a favorable rating for new or additional coverage, and cannot convert the existing plan. Or, an insured reaches the end of coverage and is diagnosed with a terminal illness and becomes faced with monumental premiums to keep the policy going. So, leaving conversion options open is a must.
Lifetime coverage may be a necessity for some in their overall planning and for that, options abound. Traditional whole life is always a secure choice and actually a way to build a cash reserve from which an insured person can borrow at some time in the future. There are, of course, caveats to borrowing too heavily from a policy without paying back the loan. There can be a fine line between prudent borrowing and stripping the value to the point where coverage collapses.
Guaranteed universal life has certainly been in vogue over the past few years. With this product, a desired length of coverage can be obtained, age 88, 93, 105––whatever the insured desires. This can be a very palatable solution, emulating term coverage for whatever longevity an insured deems appropriate.
There are also solutions available that allow an insured person who is concerned about leaving a large lump sum to someone who might not be able to manage it in the best way. Settlement options exist that allow a beneficiary to receive a lump sum at the passing of the insured, then collect income payments for a specified period with perhaps another lump sum at the end of the income stream.
Finding the best blend of options can remove most of the “what ifs” from any financial plan and create a sense of well being with a platform from which to build financial success in a family’s planning.
None of these issues are new and one need not be a rocket scientist to design a successful platform for a financial plan. However, when it comes to mortality, it seems as if the natural instinct for a family is to dodge the hard questions unless a trusted advisor assists in bringing the issues to the forefront.
As life insurance professionals, it is incumbent upon us to help clients peel back the layers of uncertainty and motivate them to build the base for a successful financial plan. Our objective is to bring peace of mind and confidence to our clients, while they build their future and ensure that their goals will be met if they follow a well thought out plan.
Jeff Watkins is a brokerage manager at First American Insurance Underwriters in Needham, Mass. He can be contacted at 800-444-8715 or [email protected].