Most people take their insurability for granted, assuming that when they’re ready to address their life and disability insurance needs for either personal or business needs; they’ll just apply and write a check for the “super preferred” rates their agent showed them. The underwriting process is a true wake-up call for most people – all those lifestyle choices they’ve made over the years or just pure genetics are exposed often resulting in higher than expected premiums.
Typically the response to higher premiums is “I’ll just buy less insurance.” What happens if that isn’t an option? The bank, business partners, dependents, estate planning etc. may dictate the amount needed. Now you need the advice of an experienced adviser to design an insurance portfolio which is both affordable and meets the required coverage level.
Most people are aware that there are two types of life insurance; permanent and term. As for disability insurance, many still don’t purchase it believing they are infallible and not wanting the extra expense-especially when they’re starting out in their careers. Most don’t realize that as a business owner, they should not only have personal disability insurance but also overhead expense coverage should the business become “disabled” due to a catastrophic event.
When discussing insurance with one of our advisers the focus will be 1) what are you trying to accomplish/protect and then 2) underwriting. Once you know exactly how much your disability and/or life insurance are going to cost, the work of designing an insurance portfolio can begin. Discussions regarding items such as convertibility, cash values, increase options, loans, paid up additions-just to name a few- can take place and you’ll learn how to approach your insurance portfolio with the same enthusiasm as you approach your investment portfolio.
Similar to your investment portfolio, your insurance portfolio is not a “set it and forget it” item. As your life changes and/or your business changes you should be reviewing your insurance portfolio. If you have guarantee purchase or convertibility options built into your policy, you should understand the importance of these options and the role they play in your overall financial well-being especially if you have health concerns.
While you are reviewing your life insurance portfolio be sure to ask about charitable gifting through life insurance. Another often overlooked use of insurance is insurance on children or grandchildren. What better gift than to secure their insurability? Typically policies can be written for up to half of the amount in place on the parents for children under 14 years of age. Regardless of what happens to the child’s health into the future, as long as the premiums are paid or cash values are sufficient, the coverage will remain in place providing protection options that might otherwise not exist for them in the future. Ownership of the policy, including any cash value, can be transferred to the child/grandchild in the future. If structured properly, cash values can be utilized to help offset college tuition.
Your insurance adviser, in conjunction with your legal and tax advisers can help you achieve the desired outcome however it is up to you to secure your insurability and that of those you care for by taking action promptly.