Life Insurance: Getting It Just Right

Life Insurance: Getting It Just Right

How much life insurance does a client need?

It’s bad enough to have too little, but the harm caused by having too much is sometimes overlooked. Indeed, industry evidence suggests that many people buy more life insurance than they need – the reasons aren’t too hard to figure, but it’s a financial mistake, in any case. How can an advisor help them get it just right?

Our linked article features an interview with certified financial planner Joe Elsasser, who specializes in helping retirees rationalize their holdings. He starts by recommending a cautious, balanced approach to the problem: how much does the client need to protect his or her vital interests? If they hold one or more life insurance policies, how well have these performed for them? Life policies are neither good nor bad in themselves, he cautions: everything depends on how well they support the client’s financial goals into retirement.

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Life insurance is valuable protection for a wide variety of purposes. He gives the example of a man who owns a farm and has two sons – one wants to run the farm after dad passes on, the other is uninterested. The farm doesn’t hold enough cash to pay off the second son’s interest. This problem could arise over many kinds of businesses or other assets. In these cases, life insurance can provide the cash at death to pay off son number two and allow son number one to take up the farm without any hindrance or fear of sale.

One consideration has a rather dire-sounding name but illuminates a crucial issue: at-death need. When you pass away (that sounds better), will there be an immediate need for income? If there is a surviving spouse or other dependent, the answer may well be yes, making the death benefits of life insurance vital. If not, your funds might be more effectively employed in a different class of investment.

For more information, please read:
How to Help Retirees Pick the Right Life Insurance: Hidden Value | ThinkAdvisor





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