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A PLAN FOR THE UNEXPECTED

By April 29, 2020 Insurance

Life insurance serves as one of the most important pillars to sensible financial planning, yet securing a policy is not something that many people are willing to tackle proactively. While life insurance is universally essential, there seems to be a lot of confusion and skepticism around it due to its unique complexities. Plus, the process of obtaining life insurance is lengthy, and there can be an aura of morbidity around the subject that people tend to want to avoid.

The fact of the matter is that death is a part of life, and planning for your absence does not need to be a melancholy experience. In fact, life insurance can provide a valuable peace of mind for the policy holder. It is deserving of consideration (at the very least) in every household and getting a policy implemented is absolutely one of the best things that you can do to ensure that your loved ones are taken care of after you’re gone.

 

WHERE TO BEGIN?

First of all, if you are the breadwinner of your family then having some form of life insurance in place is virtually mandatory. However, life insurance is not something that everybody benefits from. We strongly recommend consulting a financial advisor or a trusted insurance agent to find out exactly what your needs are before you get started. Life insurance is an investment that stays with you for years, so you do not want to get yourself into a pickle by committing to a policy that ultimately does not serve your interests.

Once you have consulted a professional, if you are deemed an appropriate candidate for life insurance, then the sooner you get the ball rolling, the better. Life insurance becomes progressively more expensive as you age, so waiting to buy into a policy could become more of a financial burden for you over time.

It is imperative to arm yourself with proper information before you dive into the process of acquiring life insurance. There is a lot to consider before choosing your policy and we want you to be confident in the choices that you make for yourself and for your family.

 

HOW MUCH INSURANCE DO YOU NEED?

This is a question with many possible answers. To help you evaluate your necessary coverage amount, we have created what we call the L.I.F.E analysis:

L – Loans

I – Income

F – Final Expenses

E – Education

It is strongly advised to take each of these L.I.F.E. components into consideration when deciding on the extent of your comprehensive life insurance plan.

 

Loans

Let’s start with loans. Do you have a mortgage? Student loans? An auto loan perhaps? Maybe you’ve racked up a robust balance on a credit card or two? No judgement here, most of us carry around debt in one form or another. But if you died tomorrow, your estate (your assets owned at time of death), would need to cover your outstanding debt, and your heirs would have to manage that situation. In Ohio, creditors have up to six months after your passing to file a claim against your estate, and anything paid would reduce any inheritance you had hoped to leave to your loved ones.

Generally, it is your next of kin that takes on the burden of dealing with creditors in addition to managing the hardship of loss. And what happens if you have more than one “next of kin” family member? How do they decide what portions of the estate or inheritance covers the debt? To avoid a probate court room drama, make sure that your life insurance covers any personal liabilities that you may have so your debt doesn’t end up creating a burden, financial or otherwise, for your loved ones.

This goes for any business liabilities that you may have as well. Do you know what would happen to your business in the event of an untimely death? Do you have a succession plan? It is important to determine who inherits the business-its assets and its liabilities-and to guarantee that you have adequate coverage provided by your life insurance policy so any outstanding business debt can be absolved.

 

Income

Your life insurance should not only cover outstanding debt that you leave behind, it should also be able to sustain your family’s expenses long term. If you have anybody relying on your income for their financial well-being (this includes a spouse, children, parents, etc.), do them a solid and set them up for financial success in the event of your absence.

Ideally, we recommend having enough coverage for five to ten years of income replacement. For example, if you make $200k annually, your policy should be able to provide your loved ones with at least $1 million-$2 million to live off of after your death. This conservative strategy will help offset the inevitable financial consequences that will be associated with the loss of your life.

 

Final Expenses

Admittedly, discussing final expenses is breaching that so-called morbid territory, but it is a crucial aspect to consider when deciding on the worth of your life insurance policy. In the aftermath of an unexpected death, the last thing that your surviving family members want to be dealing with is a financial complication arising from the costs accrued by your burial. Average burial costs can range anywhere from $5k-$10k+. Having a life insurance policy that covers these substantial, untimely costs will safeguard your family’s financial security at a time when they will need it the most.

 

Education

If you are planning on paying for college or trade school tuition for your children, it would be wise to factor those costs into your life insurance policy as well. It is no secret that continuing education after high school is incredibly pricey and with the loss of income that your family will experience in your absence, the possibility for higher education may become out of reach. Having life insurance coverage pertaining to education will provide your family with the funds necessary to afford schooling. This will not only relieve fiscal stress; it will also protect your children’s opportunities for achieving future success.

 

YOUR JOB OFFERS LIFE INSURANCE: SHOULD YOU BUY YOUR POLICY THROUGH YOUR EMPLOYER?

A lot of times companies will offer life insurance as a part of their benefits package, which can be quite enticing. A major benefit to purchasing life insurance through work is the convenience. And if the cost of life insurance is of vital concern to you, a standard plan offered through your company may come at no cost to you at all.

However, the standard life insurance policy offered through most companies typically does not provide enough coverage to replace a loss of income. According to a studying conducted by NerdWallet, typical group policy coverage amounts range from $25k-$50k, or they will cover the cost of an employee’s annual salary for one year. Keeping the L.I.F.E analysis in mind, I think it is safe to say that while your job may offer an effortless, low-cost insurance plan, this plan alone will not be sufficient enough keep your family financially protected in the event of your death.

The good news is you always have options – you do not have to choose between an employer’s group life insurance policy and an individual policy. To work around those job-offered life insurance inadequacies, you do always have the option to supplement any remaining necessary coverage with an individual plan.

Something to keep in the forefront of your mind is that if you do decide to purchase life insurance through your employer, the coverage will not follow you, and you will find yourself either completely uninsured or under-insured (if you invested in a supplemental individual policy) if you wind up leaving the company. The value of securing your life insurance through an individual insurance provider is that you will have peace of mind knowing that the coverage will follow you throughout the whole term of the policy or possibly throughout the whole term of your life.

 

NOW IS THE BEST TIME TO BUY

I know we’re all sick and tired of talking about the coronavirus, but with the extraordinarily high infection and mortality risk that the virus poses, now is the best time to buy life insurance. And BONUS – that aforementioned lengthy process to obtain life insurance has now been made obsolete.

On a regular day, your life insurance application would most likely include medical tests, and the time-frame for which you would acquire your coverage would be hinging on document filing efficiencies. Now however, insurers are waiving medical tests in lieu of video interactions and issuing policies quicker than ever before.

An added advantage to purchasing life insurance today is that you are able to avail tax deductions under Section 80c of the Income Tax Act if your premium is paid before June 30,2020 – who doesn’t love a good tax break?

Wearing a mask and washing your hands isn’t the only way to protect yourself and your family from the throws of this pandemic. Take advantage of your newfound time – spring into action and purchase a life insurance plan that you know will provide your loved ones with the security they need.

Life insurance shouldn’t be thought of as a mortality reminder, or a concept used to apply a monetary value to your life. It is they key to a sound financial plan and it will safeguard your family long-term when your time is up and the stability that you provide is lost. Be proactive and purchase your life insurance policy today. Camargo Insurance will be there for you every step of the way.

For a more in-depth look at the nuances of Life Insurance – like what is Whole Life versus Term Life Insurance? and what factors can affect your Life Insurance premium? Stayed tuned to Camargo Flow BLOG – we have more info to come! In the mean-time, if you are ready to chat about your options and what is right for your family – check more information on life insurance and contact with Camargo Agent, Adam Hengst.