“If something happened to you yesterday, what are we going to do to replace your income?”
This is often how Robert “Robie” Stafford broaches this sensitive subject with his clients. Stafford, a financial advisor with Regions Investment Solutions in Central Florida, makes life insurance part of all of his discussions with clients when they step into his office.
While mortality isn’t necessarily a dinner party topic, it is a conversation that most of us should be having – with our partners, our older children, and with our bankers.
“According to the USDA, the average cost to raise a child in Central Florida is more than $17,000 per year,” Stafford noted. “Life insurance is about a plan for the family – looking at the broader picture and planning should the unexpected occur and you are left with an income deficit while raising kids.”
Life insurance is about a plan for the family – looking at the broader picture and planning should the unexpected occur and you are left with an income deficit while raising kids. Robert Stafford, financial advisor with Regions Investment Solutions
Think You are too Young for Life Insurance?
Think again, says Stafford, who recalls a 20-something client who was recently denied life insurance coverage due to a chronic health condition.
“When you are young and healthy is the time to get life insurance. My client was in their early-20s and was essentially told they were too young to already be that unhealthy,” explained Stafford, who really felt for this client and others in similar situations where insurability unaffordable or non-existent due to an insurance company’s risk policies.
Stafford notes that the younger you are the less expensive a life insurance policy can be, and like trying to get homeowners insurance with a hurricane on the way, once you need one it’s hard to get one.
Grappling With the Unexpected
Stafford shares a common scenario where an older couple, usually 50s or 60s, comes into his office to talk about their investments. Oftentimes one spouse brings in the lion’s share of the family income.
“As part of the process with clients, I suggest we talk about creating a financial plan which includes a debt and income review,” said Stafford. “These are often single-income families that – while they have high incomes – they also carry debt on luxury items: cars, boats, vacation homes.”
In too many cases (one is often too many in these circumstances), the individuals are healthy and don’t feel they need life insurance until they are closer to retirement age.
As part of the process with clients, I suggest we talk about creating a financial plan which includes a debt and income review. Robert Stafford
“The heartbreaking scenario is when a spouse is back in my office under the unfortunate circumstance of losing their loved one,” said Stafford, who shared that sometimes it is only during that hard conversation about handling estate financials following an unexpected death that the family wishes they had made life insurance part of their earlier financial planning.
Stafford says that oftentimes much of an estate’s wealth is tied up in retirement accounts or other investment vehicles, leaving the widow with tax consequences and/or penalties when generating income following the loss.
Permanent or Term Insurance?
Now that you’re thinking about life insurance, it is time to look at the various options to determine which is right for you.
Permanent life insurance is just that – a life insurance policy that is lifelong coverage. As long as the premiums are paid, there is no expiration, and the benefit is paid upon death of the policyholder. There are many tax benefits to a permanent life policy, largely around the maintenance and transfer of family wealth including reduced taxes. There are also some bells and whistles that can be added to life insurance policies, including a chronic illness rider, which Stafford highly recommends.
Term life insurance is coverage for a certain period of time, such as 10, 20 or 30 years. As you approach the end of your term most policies allow you to renew annually at a higher rate, but a flexible policy should give you the opportunity to transition into something permanent if that fits your plan. After that time has passed, the policy can be renewed – sometimes at a new (and potentially higher) rate – or in some cases, rolled into a permanent life insurance policy.
“For our younger clients, you’re looking at the equivalent of the cost of a cup of coffee for coverage,” said Stafford. “Term life insurance can also be converted, so you can take it out in your 20s, 30s or 40s and convert to a permanent life policy without having to prove insurability again.”
Statistically, 70 percent of individuals in their 70s incur chronic illness which often leads to a need for managed care. Even if you are in the 30 percent who don’t, a chronic illness can develop, so it is important to look at your family health history and understand the potential risks.
“Talk to Me About Your Children”
Stafford always includes this topic when consulting with his clients.
Among the many necessities of parenthood, life insurance should be on that list. Whether you already have children or are planning to have them in the future, life insurance can be instrumental in setting the stage for financial security in the event of the unexpected.
Raising a child is a full-time job.Robert Stafford
“I often see clients in early 60s looking at retiring in the next three-to-five years who still max fund their retirement accounts without consideration of how those assets would pass through the estate in the event of an untimely death,” said Stafford. “Why not create a plan incorporating life insurance? Now we’ve created a tax-free pool of money which can grow over time, that will offer the estate several layers of flexibility in protecting your hard-earned assets.”
If you are planning to have children, plan ahead in terms of life insurance says Stafford.
“Raising a child is a full-time job,” said Stafford. “What if something happens to one parent? According to the MIT Living Wage Calculator, 60 percent of the cost of raising children is the general care of the kids. What are we going to do to replace the income?”
Another benefit of life insurance in this scenario is that you can also secure insurability on your children with a child-term rider.
“This can guarantee their insurability,” Stafford noted. “Then they can convert that into their own policy in the future.”
If you are still on the fence about life insurance, check out these additional resources from Regions or reach out to a financial advisor in your area to learn more.
Regions Investment Solutions is a marketing name of Cetera Investment Services. Securities and insurance products are offered through Cetera Investment Services LLC, member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither Cetera Investment Services nor Cetera Investment Advisers is an affiliate of Regions Bank or its related companies Regions Investment Solutions: 250 Riverchase Parkway East, Hoover, AL 32544(800) 598-9164
This information is general in nature and is provided for educational purposes only. Information provided and statements made by employees of Regions should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation. Information provided and statements made by individuals who are not employees of Regions are the views, opinions, or positions of the individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Regions. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.
Annuities and Life Insurance are offered through Regions Investment Services, Inc. which is a wholly owned subsidiary of Regions Bank. Guarantee of insurance and/or annuities derives solely from financial status of the underwriting/issuing insurance company, which is not affiliated with Regions Bank.