Almost everyone knows life insurance is an agreement you make with an insurance company to pay your beneficiaries a lump sum upon your death. Proper life insurance coverage should provide you with peace of mind, since you know that those you care about will be financially protected when you are gone. However, many people delay or never take care of this need.
Last year LIMRA (a life insurance and financial services association) found that 30% of U.S. households have no life insurance at all, and 50% think they need more life insurance. So why don’t consumers get more life insurance to fill these gaps in coverage?
We believe most people recognize the importance of life insurance, but they don’t trust how the insurance industry calculates life insurance need. Almost every insurance company, and its sales force, encourages consumers to use some simple “rule of thumb” calculator to determine how much coverage people may need, such as 5 to 10 times earnings. It’s like saying, “One size fits all” to decide one of the most important and specific financial decisions of a person’s life.
Most Certified Financial Planners® would say that using these types of simple standards are very inadequate, and ineffective for most people. When buying life insurance, the important question is not, how much you need, but how much in resources (cash, certificate of deposits, investments, insurance, and investments) will your family need at your death and in the future to meet their financial needs? This question isn’t just about life insurance, but all of your resources.
Life insurance planning is just one part of a comprehensive financial plan. So, it makes more sense to complete a financial plan (that includes analysis for investments, retirement, and all forms of insurance). This process will determine how many resources your have, and how much you will need for many circumstances, not just insurance coverage.
If your financial planning process is done properly you will have an objective tool for making many sound decisions, and this evaluation is not focused on selling you more insurance. Finally, with today’s technology, your financial plan can be continuously and easily updated so you can use it to make decisions as your life changes.
by Van Sievers | May 25, 2017
Author: Van Sievers
Source: www.montgomeryadvertiser.com
Retrieved from: www.montgomeryadvertiser.com