Everyone leaves a legacy - some good and some bad.
This is what I remember when my Grand Father died - he didn't have enough money in his possession to 'bury his ass' in the ground. My dad was so annoyed that his father didn't even look after his own burial and now he, my father, had to pay for it. What I now remember about my grandfather was that he died a broke man and was irresponsible - that's not a very good legacy or memory to leave. My dad was adamant about pre-paying for his and my mom's funeral expenses, to not leave a burden for my siblings and me.
How NOT to be a Deadbeat Dead Person
As Financial Planners, it's our responsibility to provide you with objective advice and planning to help you reach your goals.
There are 6 key areas of financial planning (Taxes, estate, investments, cash flow, assets and risk management) and this month we want to focus on Insurance. Before you run and hide, please take the time to read further. We are not trying to sell you something, but explain to you the incredible value of having even a small amount of whole life insurance as a part of your financial plan. Below we'll show you 5 Great Reasons whole life insurance should be a part of a solid financial plan:
There are 2 types of life insurance:
(1) Term insurance - this is the type of insurance you buy for a temporary need for typically a 10, 20 or 30-year term. This insurance is the cheapest type of insurance and is meant to offset the risk of premature death to be able to provide for your loved ones, ie: pay for the kids to go to university, pay off the mortgage and other debts and cover the ongoing daily living expense for your family if one spouse dies prematurely. Every responsible man or woman should ensure their family is looked after financially in case a catastrophic loss like this occurs.
(2) The second type of insurance is Permanent insurance and this is where whole life insurance comes in. This insurance lasts for your whole life, earns dividends annually from the insurer, and grows in value over time. These dividends can function in several ways. They can remain in the policy on a tax-free basis, they can be used to buy more insurance each year, they can be used to lower your premiums, they can pay for the premiums, or they can be paid out to you as a form of income. Because the companies that offer these types of policies are long-established, large insurance companies they have been paying out these dividends for decades and are completely reliable.
5 Reasons why we love these types of policies:
1. The policy can be fully paid for within a specific time frame. (8, 10, 20 years etc). No one wants to be paying for insurance their whole life. Even after you no longer have to pay premiums the policy continues to receive dividends and grows each year increasing in value until you either die or cash it in.
2. The growing cash value can be used for retirement income, long-term care expenses, or another need as you see fit.
3. The policy dividends, if used to buy additional insurance, will increase the death benefit significantly. Upon your death this can be used by your estate to pay for estate taxes or be used to provide an inheritance for your family.
4. The policy can be donated to a charity to provide a significant legacy and create a tax deduction for your estate, increasing the inheritance that goes to your beneficiaries.
5. Covering your final expenses. There can be significant expenses related to more than just funeral costs and many people do not realize that there are many ongoing expenses while your executor wraps up your estate such as property taxes, accounting, bank fees, probate fees, lawyer fees, etc. Whole Life insurance provides a tax-free benefit to pay these expenses instead of depleting your assets you intended for your beneficiaries. Insurance is paid out very quickly - usually within 2-3 weeks.
There's really no other financial vehicle that can provide so many benefits to you and your family on a relatively low-risk basis and with such tax-efficiency.
Conclusion
The best time to get one of these policies is when you are younger because the insurance will be much cheaper and you have a lot of years to see it grow in cash value.
Leaving a Legacy:
If it's important for you to leave a legacy then these whole life policies are great policies to have on your children or grandchildren. It's a lasting legacy to be able to leave to someone a fully paid-up insurance policy with a cash surrender value. We have hundreds of these within our practice and we have the evidence of how wonderful these policies have worked for literally a few dollars per month.
If you have a current term insurance policy there is usually a conversion option to convert all, or a portion, of your term policy amount into a permanent whole life policy without having to go through medical underwriting. Never cancel a term policy before checking with us to see what options are available for you. We have an in-depth knowledge of insurance and can help you put a great plan in place to meet your financial goals and objectives. Give us a call or send us an email to discuss your situation. 587-755-0159
Willis J Langford BA, MA, CFP
Nancy Langford CRS
Retirement Income & Investment Planners
