Life Insurance: An Essential Financial Tool in a Down Market

Steve Spector, Managing Director of Risk Management Services   email | bio
February 2010

 
Headlines in 2009 seemed to have a consistent theme of unpredictability. Whether it was the continued coverage of the struggling economy or the untimely deaths of public figures, we were reminded that proper financial planning is necessary to protect our families and our businesses against the unexpected. This past year we saw the premature deaths of Michael Jackson (age 50), Chris Henry (age 26), Danny Gans (age 52) and Steve McNair (age 36). Each is an excellent reminder that we need to take every step possible to reduce our, now increased, financial vulnerability.

Whether your concern is proper coverage or replacement considerations related to your asset losses, life insurance can be a critical tool. And, the best way to ensure that you are well-covered and/or have maximized your existing policies is through an unbiased review of all of your policies and your personal goals. This review is extremely important if you:

• Own a policy that has not been reviewed in the past five years;
• Experienced a change in your personal, physical, financial or business situation since the policy was issued;
• Had changes in your needs and/or goals; or
• Need to value a policy for an estate or trust.

Common outcomes of such an appraisal are deciding to retain a policy, change a policy or sell a policy in the secondary market. An appraisal many times reveals opportunities as well. These include:

• Increasing your death benefit for the same or a reduced cost;
• Lowering your cost with the same level of coverage;
• Ensuring your ownership and beneficiary designations are appropriate; and
• Providing a more effective correlation of insurance with your estate plan.

Although the terms of an insurance policy can be fairly static, reviewing your life insurance coverage on a regular basis allows you to stay on top of the ever-changing and unpredictable variables that surround your life. There are times in your life where your life situation will require your investments to be more liquid. Some key life insurance changes that can create cash savings and better benefits include:

• Policies are not performing as projected;
• New products that may be more cost efficient or offer better guarantees;
• A policy that was once rated may be able to be issued standard today;
• Longer-term needs may make term insurance inappropriate today; and
• Policies that are scheduled for premium increases.

In addition, life insurance can: provide tax free cash when cash is needed, pay off existing debts, replace a lost salary, pay estate capital gains and income taxes, equalize inheritance, provide cash to transfer a business interest, and much more.

So, take advantage of the opportunities that a life insurance appraisal provides. It will help you, your family or your business make sure that your coverage is meeting your current and future objectives.

If you have any questions or would like more information regarding life insurance policies, please contact Steve Spector (262/754-9400 ext. 260).