Saturday, 23 March 2019

Ken Morris: Life insurance isn’t just for funeral expenses

I would be remiss if I failed to mention that September is Life Insurance Awareness Month. From a financial planning perspective, life insurance is easily overlooked and often neglected.

It’s a topic many people simply do not like to discuss, primarily because contemplating one’s mortality is not as exciting as talking about an investment in an up-and-coming technology company.

However, in this age of the Internet, when someone loses their life, especially when it’s tragically, friends or family members often have no recourse but to go on-line to seek help. GoFundMe and other crowd funding platforms have been instrumental in helping the bereaved pay for final expenses and other future family obligations.

I am certainly not downplaying the importance of helping a family after a tragedy. My intent is to simply highlight why life insurance is so important. And it’s even more so when the loss of life also means the loss of income the family needs to carry on.

Many people think of life insurance simply as money to cover funeral expenses. Like almost everything these days, funerals are not cheap. But final expenses are only part of the story. Keep in mind that, in the weeks or months prior to a loved one passing away, expenses for care and comfort tend to skyrocket.

And life insurance proceeds are also needed to replace income for wage earners, especially for those with minor children. If something happens to a wage earner, the surviving family members still need food, housing and education.

Although it’s not often discussed, life insurance is used extensively in business and estate planning. If one anticipates that a large tax bill will be due after death, life insurance can be a solution. Such planning is used to keep the doors open in businesses, family farms and for those that want to make certain money is available for future generations.

Many businesses understand that life insurance is a method of purchasing dollars for pennies. People often think they don’t need privately owned life insurance because they have a group policy through their employer. Some may even have bought additional insurance through the convenience of payroll deduction.

Then again, some employers no longer offer life insurance. According to the Life Insurance Marketing and Research Association (LIMRA), the number of companies offering group life has declined by twenty three percent since 2006.

Additionally, we’re a very mobile society, especially the Millennials. People seldom stay with one employer for their entire work career. If all your life insurance is through an employer, changing jobs can result in loss of coverage. That’s one reason I suggest households have a base of life insurance coverage that they own. It doesn’t go away if you switch jobs.

Yes I know that not everyone can purchase privately owned insurance. The reality is that pre-existing conditions do matter. Insurance companies do consider your health condition and lifestyle. They’re a business. They don’t want to purchase a guaranteed claim.

So, if you can, buy when you’re in good health, not after a visit to the doctor with a high blood pressure diagnosis.

Life insurance is an integral part of the financial planning process.

Talking about death is not a pleasant topic, but planning for it is the responsible thing to do.

E-mail your questions to [email protected]. Ken is a Registered Representative of LPL Financial. Ken is Vice-President of the Society for Lifetime Planning. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Securities offered through LPL Financial, Member FINRA/SIPC. Investing involves risk including loss of principal. No strategy assures success or protects against loss.


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