Life Insurance Isn’t Just for Dying
Friend and Collaborator, John Wheeler told me one time that insurance is like religion…you need to get it when you don’t really want it so you have it when you really need it.
As I write this, it has been one week since I was in Chicago collaborating with the top planning minds in the life insurance industry. This two-day study group was created so that we can all bring the best to the families we work with. Every meeting I have attended over the past four years has been better than the last, and this one was no exception. The key takeaway was the underlying theme “Life insurance isn’t just for dying.”
Don’t get me wrong. When you buy life insurance, you are buying a benefit to pay out upon your death - a benefit “you” will never see. However, life insurance may be just the tool “you” need before you’re six feet under. Consider these five concepts:
#5…It may lower your income taxes…. Of course, this cannot be accomplished simply by purchasing a life insurance policy, but it could be a huge part of making it happen. And by the way, there isn’t just one way to lower your income taxes with life insurance. There is a multitude of ways.
#4…It may help you lower or even eliminate taxes on the sale of a business or real estate… Imagine that windfall opportunity to sell your lifetime’s work. Sounds great until you remember Uncle Sam will join the party. Well, what if he didn’t? Life insurance could be an ingredient in this recipe.
#3… It may hedge a huge investment risk in retirement… No one knows if today is the best day or worst day in the stock market for the next five years. The problem is if you were retiring today and it happened to be the best day, this unexpected risk is known as the “sequence of returns” – and it can deplete your investments long before you are in your grave. The good news—life insurance can also insure against this risk “while you are living.”
#2…It may create tax-free income… I am not talking about when you die. This would be tax-free income for you and preferably around the time you need it most—retirement. The key to this is getting a start on it as soon as you can.
#1…It may protect your dignity…The possibility of having a long-term healthcare event shouldn’t be ignored. Someone turning 65 today has a 70 percent chance this will happen1. Yes, the reason to have insurance in place for this is to protect your family, your income, and your assets. But perhaps the biggest reason is to protect your dignity so that your children are not the ones caring for you. However, you might be asking yourself who wants to pay for insurance that might never get used or in which no one you love will ever see a benefit? One possibility is—Dignity Protection Life Insurance.
A few years ago, we attempted to work with a family business that was in dire need of help to protect future Christmases and Thanksgivings. Their current structure was a recipe for a family feud upon the passing of the family patriarch. We went through our process and came up with a few different plans to help them. The most economical of these involved the use life insurance. The patriarch would not even look at it. He had been sold life insurance years ago that he didn’t need and cost him too much money. This experience would also cost him his family. His denial made his decision that day to not pick any of the plans. Well…you can guess the rest of the story. He passed and the feud began. Today, the children don’t speak and the business is struggling to stay afloat.
People either love life insurance or they hate it. If they hate it, it is usually because of an experience like the man’s in this story. Yet life insurance can be a wonderful, significant tool when used appropriately. It could help save families, dignity, taxes, and futures. The key to this is just making sure your needs have not outgrown the person selling it to you.