Some advice to help take the mystery out of life insurance

Unicef has declared the first week of September “National Nutrition Week.” An organization of Chimney Safety advocates kick off their campaign to raise awareness for “National Chimney Safety Week” toward the end of the month.
And if that weren’t enough, the Vestibular Disorder Association has added to the dizzying array of awareness campaigns with “Balance Awareness Week” which falls on the second week of the month.
While the whole of September has already been spoken for by a number of national interests, no other organization has wrested control of an entire month to raise public awareness for a product that so few people adequately understand, and which many people actively detest. That’s right, September has the dubious honor of being dubbed “Life Insurance Awareness Month.”

Insurance: The mythical beast
Over the past ten years I’ve spent countless hours with clients discussing life insurance and how it can protect family members or business partners in the event of an individual’s untimely demise. While some choose to address the liability and protect their family, others take a more combative approach by stating simply “I do not believe in life insurance.”
Life insurance is not the tooth fairy, Santa Claus, or the Chupacabra, and I would contend that the product exists with or without an individual’s belief in its existence. Even some notable public figures who advise their listeners/viewers on financial matters seem to lack a firm grasp on the life insurance products available and the benefits/detriments of each. They end up advocating the purchase of term insurance solely because it is less expensive than permanent insurances. Is it any wonder most people don’t know a thing about life insurance?

What are your needs?
Life insurance conversations are never comfortable as they often start with the difficult question: What do you want to have happen when you pass away? More often than not, the answer I am given is another question: How much life insurance should I have?

The general rule of thumb that has been bandied about for years suggests that for personal coverage, as opposed to business insurances, six to 10 times your annual salary in death benefit should suffice.
In my experience, the most common use of life insurance is to alleviate future expenses for survivors by purchasing a life insurance policy with a death benefit sufficient to cover the outstanding balance of a home mortgage or other debts.
Term insurance, a life insurance contract which exists for a specified number of years, often with a fixed death benefit and premium payments, can be used as an inexpensive route to cover what is ostensibly a “term” need. Mortgages, like our lives, end.
Because the final mortgage payment is paid at a predetermined date, or on a fixed schedule, many people choose to purchase term insurance that meets the mortgage’s payment schedule. In a perfect world, the term policy covering this need would end the day the mortgage is satisfied. No more mortgage, no need to cover the debt with a life insurance policy, goes the thinking.

Reasons to leave it behind
Many people fail to consider covering the cost of a child’s education in the event of the death of one or both parents. They also overlook the need that arises upon the death of the primary breadwinner to replace his or her income for a number of years while the family copes with the loss and tries to make ends meet in light of the sudden reduction of the family’s cash flow. Term insurance could be considered for use in both of these cases, and since people often outlive their careers they have no more need to replace their employment income in retirement.
Still other families want to know that they are leaving their children with an estate greater than their own parents left them upon their deaths, and so they consider purchasing whole or universal life insurance policies which can serve the purpose of leaving a pool of instant wealth to future generations.

And so much more
We haven’t even touched on the tax benefits of holding cash inside life insurance policies, nor have we discussed the variety of riders that can be added to some policies to protect families against disability or even riders that help to defray the cost of long term care.
With so much to consider when reviewing life insurance strategies, no one should have to travel down this path without the guidance of a qualified and experienced financial planner and insurance adviser.
If you still want to run some numbers on your own before you make that all-important call to your trusted advisor, stop over at our website www.contewealthadvisors.com and take a look at the “life insurance need” calculator. While it should not replace a one-on-one conversation with an insurance-licensed, independent planner, it can certainly help you come up with some rough estimates of need.

Anthony M. Conte is Managing Partner at Conte Wealth Advisors with offices in Camp Hill, Pennsylvania and Fort Myers, Florida. He has a Master’s Degree in Financial Services and the Certified Financial Planner. He welcomes your emails:tony.conte@contewealthadvisors.com.
Registered Representative Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Conte Wealth Advisors, LLC are not affiliated.