Life insurance is a flexible tool that can be used in a number of creative ways to protect your money from taxes, and fulfill strategic purposes. However, with any powerful tool comes responsibility. The problem with life insurance is that it is usually prescribed incorrectly, and can be completely misapplied. Life insurance is not always the best choice, but it has remarkable value when employed correctly.
It may be helpful to think about your insurance planning from a portfolio perspective, just as you would think about your investment planning. Your investment portfolio likely contains a variety of stocks and bonds. Similarly, you may be well served by having a diversified insurance portfolio that provides you with the right tools for your unique circumstances. Remember, insurance can play many roles and does not need to be a one-policy-fits-all solution.
As always, seek the advice of a professional before making important decisions involving life insurance.
There are two primary types of life insurance. The first is term insurance, which has no savings element. The other is permanent life insurance, which does have a savings element. Permanent life insurance comes in a variety of different types, with each possessing unique features and benefits. The two more common types are Whole Life (whole of life assurance), and Universal Life, which is useful for both its tax planning aspects, and for its cash value aspects.
Policy provisions, features and benefits, and the general competitive advantage of policies can vary greatly among insurance companies. At the individual state level, even the rules and regulations can vary. Note: Always consult with your insurance advisor, and review your life insurance contract for details.
In our next post about life insurance, we’ll tell you about some of the surprising benefits of life insurance.
Questions? Concerns? Let us know. We’re happy to answer your life insurance or financial planning questions any time.
To your wealth,
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance