The Many Problems with Life Insurance and Why You Still Need It

The Many Problems with Life Insurance and Why You Still Need It

Traditions Wealth and Legacy Planning |
Categories
Financial Planning
Insurance
Life Event Planning

I contributed to an article for Nerd Wallet, called “6 Milestones and How They Might Change Your Life Insurance Needs”.

The article serves as a great reminder of the role life insurance plays at every stage in life. However, it’s far too easy to make mistakes when purchasing and owning life insurance. Here are some tips to consider if you’re buying life insurance or if you already own a life insurance policy.

Do Not Set It and Forget It

Life Insurance is not a “check the box” purchase that you never look at again. It requires an annual review just like your investment accounts.

  • Does the current death benefit still make sense?
  • Do your beneficiaries need to change?
  • Have your goals and objectives for the policy changed?

Do Not Buy and Ask Questions Later

Life Insurance is important, but it’s not something you should buy carelessly. Make sure you do homework and ask a lot of questions.

  1. Does your financial situation require temporary coverage or permanent coverage?
  2. Do you know all the pros and cons between a Term Policy and a Permanent Policy?
  3. Do know how your age and health can impact the cost of your policy now and in the future?
  4. Is the insurance company highly rated and financially sound?\

Ignore The Noise of Self-Serving Advice

It’s important to be mindful of any hidden agenda of the person advising you on your life insurance needs. There is always a BUT, even if that advice is coming from you.

  1. You can listen to media personalities, money experts, and social media influencers who provide very general advice, BUT: How do you know if that advice makes sense for you and your situation?
  2. You can contact a sales representative at an insurance company for guidance who knows their company product well, BUT: How do you know if they are giving you advice based on your situation or if they just want to meet a sales quota?
  3. You could get life insurance on your own and make it a Do-It-Yourself project, BUT: Do you really want to take the time to analyze a 25+ page insurance contract and then compare that 25+ page insurance contract with other 25+ insurance contracts with multiple companies? Even if you had the time, how do you know you’re comparing apples to apples?

Despite these problems, You Still Need Life Insurance.

It’s no wonder why people choose not to get life insurance or never review policies they have previously purchased. It’s not because life insurance isn’t important, because it is.

Go to LifeHappens.org to learn why

Life Insurance has a place in a Financial Plan regardless of how much or how little someone has. Don’t believe anyone who tells you a life insurance policy can solve all your financial problems because that is a lie. Life Insurance should be treated as one of the many tools available in the toolbox. It can tighten up 1 or 2 areas of your overall financial plan, but definitely not all of it.

So What Do You Do?

I’m not in the business of providing very generalized mass-market advice, and I don’t want to be. I firmly believe advice should be individualized and not sold to the general market as a guessing game. We all have different financial situations, goals, objectives, and reasons for owning life insurance. So here is what you should do

  1. Create a Financial Plan before buying life insurance.
    • If you’re not constantly doing a financial assessment of your situation, how do you know what type of insurance you need,  how much, and if existing policies still make sense?
       
  2. Work with a Financial Professional who has the credentials to incorporate life insurance into your financial plan.
    • A CLU® is a Chartered Life Underwriter. Click HERE to learn the benefits of working with a CLU® Professional
    • CFP® is a Certified Financial Planner. Click HERE to learn the benefits of working with a CFP® Professional.

A Calculated Risk

Creating a financial plan and working with a qualified financial professional will not fully solve all the problems associated with buying life insurance. However, I do believe it will increase the odds of buying a life insurance policy that will be in alignment with your goals and financial objectives. In my opinion, that’s a risk worth taking.

Disclosures:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Please consult your qualified tax advisor to discuss tax related strategies.