Volume VII September 2017

Life Insurance: A Necessary Evil?

More often than not, when we merely mention life insurance as a necessary part of a client’s financial plan, we see a strange look across the conference table. This can often be justified by the fact that we associate life insurance with death or the loss of a loved one. We’ve heard life insurance referred to as “morbid,” “disturbing,” and a “necessary evil,” but we like to remind clients that life insurance should be viewed as a valuable financial planning tool as well as protection for the ones they care about.

Here are a couple of true stories that we believe will shed some light on the importance of maintaining adequate life insurance coverage and keeping your policies up-to-date.

1.) A lady once told us a heartbreaking story. Her husband, who was the primary income-earner of the family, had recently passed away, leaving her in an unfortunate financial situation. He did have a large life insurance policy that was meant for her support, but unfortunately, he never updated the beneficiary on the policy after his divorce from his first wife. And you guessed it…the ex-wife received the entire death benefit. This poor lady was devastated by something that could have easily been prevented.

2.) A fellow financial planner helped one of his clients secure a life insurance policy after some hesitation on the client’s part. The policy was successfully issued, and all was well. Then, just a short time later, the client was diagnosed with a serious illness which would prevent him from getting life insurance in the future. Luckily, his policy was already in force and his family had the protection they needed.

These stories are just two examples of why life insurance constantly needs to be reviewed. Although you may not know it, you may have too little or too much coverage, or maybe your beneficiaries need to be updated. Maybe the policy you have no longer suits your needs, or maybe you’re simply paying too much.


Ryan Bubela & Zac Jones

7 Misconceptions About Life Insurance

1.)    I use tobacco; there’s no way I can get coverage. – Wait a minute. Although non-tobacco ratings are less expensive, you can get a life insurance policy issued as a tobacco user. Also, depending on the type of tobacco used (pipe, chew, dip) and your daily usage, certain companies may qualify you as a non-tobacco rating. Keep in mind that tobacco ratings are more expensive, and your best bet is to kick the habit.

2.)    I’m too young/too old. – The younger and healthier you are, the lower the cost will be. The cost of insurance does increase with age, and your health can change at a moment’s notice, so locking in a rate while you are young and in shape is usually a good idea. But that doesn’t mean that you will be uninsurable when you are a bit older. Ask for quotes; you may be pleasantly surprised.

3.)    I don’t need any . - Possibly, but not necessarily. Some people reach a point in their lives when their debt is paid off, their children are grown, and they feel they no longer have a need for life insurance. Don’t forget that life insurance is an efficient way to transfer wealth to your heirs or favorite charity.
4.)    My current insurance is adequate . – Is it? Have you reviewed your financial situation lately to determine your need for insurance? Common life-changing events can cause a need for an insurance review including: the birth of a new child, purchase of a new home, loss of a job, starting your own business, marriage, and divorce. Trust-owned life insurance and life insurance for buy-sell agreements should also be closely monitored.

5.)    My premium is already as low as it can be. – Maybe not. The life insurance industry is constantly changing. Life expectancy is increasing and premiums must stay competitive. Even if your policy was written years ago, it may be worth comparing to other insurance companies or newer products to see if your premiums can be reduced. 

6.)    All life insurance is the same . – Not true. There are several different types of policies which usually fall under one of two categories: temporary and permanent. Permanent policies are often much more expensive, while temporary policies are less costly but only last for a certain amount of time (usually 1 to 30 years). There are also many different companies out there, some that may suit your needs better than others. You should fully understand your choices before you make a decision to purchase a policy to suit your needs.

7.)    It’s too expensive . – Probably the most common misconception I hear. It may actually be too costly not to get, especially if you have young children, owe large amounts of debt, or own your own business. Policies for healthy individuals are usually very affordable.

We hope you're inspired to dust off those old insurance policies you have stored in your file cabinet and take a closer look at what you have. If you could use help reviewing your existing life insurance policies, or if you would like a calculation to see if your life insurance coverage is appropriate, contact us. Also, if you have any friends or family who may need assistance, let them know that we would be happy to help them. We're just a phone call or e-mail away.

Investment advice offered through Strategic Financial Concepts, LLC (SFC), a registered investment advisor.
The Bubela Wealth Team
Phone: 512-753-5672
11902-A Burnet Road
Austin, TX 78758
Investment Advisor Representative
Phone: 512-787-3748
1718 Lavaca Street
Austin, TX 78701