What in the world am I going to do now? It’s one of the first questions asked when a recently widowed spouse is referred to my practice. Cash flow analysis shows that once the fog clears, hard decisions are necessary in order to find some level of financial security. A move, new schools, and less time with the kids often are written into the next chapter of the new normal. I detest this part of my practice – coming into the equation when it’s too late to make a difference.
There is no area of planning more important to your family than planning for the worst. It’s easy to plan with hope for the future, and you should. However, ignoring the reality that not everything always goes as planned can be far more catastrophic than having an under-performing fund in your assets.
Life insurance is a tool that, in my opinion, is needed in every financial plan. Often it is viewed as a commodity and not fully appreciated for its potential impact on financial strategies. Life insurance is an intangible asset; you may never know how good it is until it’s time to use it! And when you do need to use it, is most certainly the wrong time to figure out that you have made mistakes.
Serious consideration is necessary, and it should cover far more than premium amounts. What is the main purpose of life insurance right now? What will be your needs as you age? In years past, the argument could be made in some circumstances that life insurance would not be needed for retirement. Today, however, people are living longer and depleting assets. Our dependence on assets for income in retirement is greater than ever. Having a permanent life insurance policy with accumulated cash value could make sense as an income supplement vehicle in retirement if your insurance needs decrease, and it also can greatly reduce pressure on assets kept in reserve for the “what ifs” of retirement. Of course, accessing the cash value of a life insurance policy will reduce the death benefit and cash value, and it may cause the policy to lapse in certain circumstances.
In your early years when raising young children, the starting place involves a hard question: If one of us dies tonight, how much income would the surviving spouse need? Your conversation should include debt elimination, college expenditures, emergency funds, final expenses, and income replacement. Think about extended circumstances, such as your children potentially being raised by grandparents and what happens when they die? Also what about health insurance costs? Families with children who have special needs have unique considerations.
With so many areas warranting examination, it makes sense to work with a life insurance professional who offers solid knowledge about available products. Also visit scc.virginia.gov for a helpful resource about life insurance products.
Trust me and the families of loved ones who have died unexpectedly: The choices related to life insurance are some of the most important decisions you will ever make. When someone dies, especially unexpectedly, the last act of love involves the provisions made for the family. Will you leave them wondering for the rest of their lives why you left them in financial chaos? Or will your love letter sing words of comfort long after the flowers have withered and the cards have been stored away?
