Life Insurance
Life Insurance is an important part of your overall Financial Plan and you should make sure your coverage is adequate to meet your objectives. Your goals are constantly changing depending on what is happening in your life. Start with a policy review. Does your policy:
Effectively meets your goals in providing liquidity to meet financial obligations
Your policy is performing efficiently; or
While regular reviews are important, certain events are more likely to change your coverage needs. Some life events that can cause you to review your coverage are:
Births and Deaths
Marriages and Divorces
Starting a business
Purchasing a home or additional real estate or refinanced
Received an inheritance
Creating an Estate Plan
Change in Job Status
Charitable Giving needs
Any of these life events could cause a need to add or subtract from your present coverage. A proper life insurance review entails more than just a review of your death benefits. Policy review components should include:
Premium and performance analysis to ensure your policy(s) is performing on a cost effective basis (Whole Life, Universal Life, Variable Life)
Ownership and Beneficiary Designations to ensure that the policy is set up correctly and will meet your specific needs.
In the event of your death, life insurance provides money directly to your beneficiaries. They can use the money for whatever they want, such as:
Make up for your lost income
Fund your child's education
Paying off household debt
Paying for your funeral and other related expense
If you were to die, consider what your spouse and dependents would need in order to cover day-to-day as well as larger expenses, to live comfortably and have financial stability. Don't forget to include savings for college and retirement. Also consider the effect of inflation over time; the amount needed, say, twenty years from now is likely to be significantly higher than today.
In addition to protection, what am I trying to accomplish with my life insurance?
Some life insurance policies can help you pay for major expenses like college tuition and estate expenses, or provide additional income for retirement or emergencies. Remember that Term Life Insurance pays a death benefit only, while different types of Permanent Life Insurance -- Whole, Universal, and Variable Universal Life — can supplement your income through withdrawals or loans against a policy's cash value. W. alt Disney borrowed on his life insurance policy to start his Company.
What are the tax advantages of life insurance?
Death benefits are generally received income tax-free by your beneficiaries. In the case of Permanent Life Insurance policies, cash values accumulate on an income tax-deferred basis. That means that you would not have to pay income tax on any earnings in the policy as long as the policy remains in effect. In addition, most policy loans and withdrawals are not taxable.
However, if you surrender your policy—or it lapses—you may have income to the extent that distributions and/or withdrawals exceed your policy basis (i.e., total premiums paid less prior distributions).
LC Advisor can help in determining the best coverage is for you based on your current situation, your goals and your current tax status.
Self-Service Review Work Sheet and Sample Policy Review Report