Everyone should have life insurance on some level, because dying is not free. Funeral costs average between $10 and $20 thousand dollars. With the wave of baby boomers approaching the sunset of their lives, the laws of supply and demand will tell us that these costs will continue to increase. If someone is a provider… has a family… the need for lost income can be substantial.
Business owners absolutely need to incorporate life insurance into their business planning, especially if they have a partnership. Ask yourself, “What is your business worth,” with you out of the picture. Life insurance can make a family whole if the business become worthless upon your death. If you are in a partnership, do you want the deceased’s spouse to be your new partner, or do you have the cash to buy them out? Life insurance in conjunction with a buy-sell agreement can cleanly buy out a spouse and/or provide the company capital to hire a qualified replacement.
We like to break down life insurance into two groups: Term and Permanent.
Term life is just that… coverage for a specified term (time). If you outlive that term you will need to purchase new coverage, assuming you can qualify for it. Term is great because it is so affordable. It’s so affordable because most everyone outlives the term of the policy. Most carriers will offer a conversion rider within the term policy allowing you to convert your term policy to a permanent life policy at specified points of the contract. Buy what you can afford now and as you get older and more successful convert portions or all of the policy over to a permanent policy.
NOTE: The older you get the harder it is to qualify for coverage. Most carriers do not offer term coverage to people over a certain age 65-70. This is why the need for permanent insurance is so vital.
Permanent life comes in many forms and names. We are not going to go into detail here but you should know that over many generations of improvement we now have IUL (indexed universal life). If used correctly, this can be the most powerful investment in your portfolio.
IUL’s pull together the best of all things in the investment world:
- Why do you invest in an IRA or 401K?… taxed deferred growth.
- Why is a Roth IRA better than a standard IRA?… money goes in post-tax but comes out tax free.
- What’s great about life insurance?… Tax free payout upon death.
IULs are funded with post-tax money, grow tax deferred and come out tax free. The money accrued within the policy is tied to one or more major world indexes (NASDAQ, S&P 500…). Although that money will have a ceiling or limit to its return it also has a floor guaranteeing you no loss. You can also borrow against the money you have accrued and use it for tuition, investments and/or retirement.
We strongly encourage you to educate yourself on the power of IULs. Contact us and we can provide links to several videos that go into great detail on the power of these products.