Life Insurance and Financial Planning

This blog post is a continuation of a 7 part series on life insurance. You can find the first post here: http://www.your-insurance-experts.com/why-get-life-insurance-part-1/

Life Insurance Solution – Financial Swiss Army Knife

Maria, the financial planner, asked Justin to consider a properly structured Indexed Universal Life Insurance (IUL) policy. Considering that Justin wanted to make a responsible decision that was best for his family, he asked Maria to explain how it works. Before Maria was willing to give any details, she had to make sure Justin realized that he would not deviate from the plan, short of a life altering emergency. Justin agreed.

Maria began to explain that the foundation of this plan is permanent life insurance. Justin politely interrupted Maria to inform her that he already had a permanent policy. Surprised, Maria asked Justin to get the policy so she could see it. Even more surprisingly, Justin had an indexed universal life policy, but it was not structured to provide the most efficient financial benefit for Justin. His IUL was structured to make the minimum payment possible to cover the death benefit.

In order for Justin to use his policy to outpace inflation, Maria encouraged Justin to take his extra income to maximum fund his Indexed Universal Life Insurance. Justin looked puzzled because that meant instead of paying $400 a month for a $500,000 policy, she asked him to put away $1,400 a month. Noticing Justin’s non-verbal disapproval of her suggestion, Maria asked, “If I asked you to put $1,000 a month into your bank account, you wouldn’t say that’s too expensive, would you?” “Of course not”, Justin replied, “It’s my money.” “Exactly”, Maria explained, “Making deposits into your bank account isn’t a cost. In fact, it’s a favor you are doing for yourself now to significantly benefit you later. This is the same way you have to view your IUL.” Justin began to look at her idea differently, and was open to hear what she had to say.

Regarding investment and financial matters, we are either uninformed or misinformed. As a result, it is very difficult for us to distinguish between truth and opinion. In the case of cash value permanent life insurance, misconceptions often run amok because some of the people who offer their opinion are well respected and popular. No matter what, every investment has pros and cons.

In the next blog post, we will discuss why it is my opinion that cash value life insurance is the best place to allocate your retirement income so that you can Outpace Inflation.