Should You Own Life Insurance?

November 12th, 2014 by John Murphy

Clients often ask us whether or not they should own life insurance, and the answer is never simple. Each of us lives within a unique set of circumstances, and what works for our friends and neighbors might not work for us. Before you analyze your situation it’s key to remember this: Life insurance is not an investment. It is protection from a life event.

Perhaps you worry that your family would have a difficult time supporting themselves if you died unexpectedly. Life insurance can provide enough money to see children through college, help a spouse with the loss of income or even help to cover estate taxes.

Analyze Your Need

Let’s say you have your financial life squared away. Your only fear is leaving your children without the means to get them to adulthood, and we all have different ideas of what age that is for our children. An advisor at B&C Financial can help you arrive at a number that would cover the care of your children should you pass away prematurely. We will help you establish a timeline of when  insurance is no longer necessary. In this scenario, term insurance is the best choice, and it’s the cheapest solution to reach your goal.

What if you were to pass away prior to accumulating enough savings for retirement? There are many questions that come to mind given that scenario.

Do you want your house paid for?
How much money will be required to cover all your debts?
Would your spouse or family need steady cash flow to remain comfortable?
How long would your loved ones need financial assistance?

 

The answer to these questions and others will determine the type of insurance you may need. Term insurance is the cheapest option and will meet most people’s needs. Whole life can be an option depending on the purpose.

For example, a popular use of insurance for wealthy individuals is to establish an irrevocable life insurance trust. It can be funded enough so the trustee would be able to purchase insurance within the trust in an adequate amount to cover any estate taxes you may have. Consult an estate planning attorney to see if this is something you need to pursue. In addition, if you have no will you should speak to an estate planning attorney to plan for end of life events, and also protection in the event you are incapacitated.

Please let us know if B&C Financial can help answer any questions you might have about life insurance.

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