What are you Missing from your Financial Plan?
Due to the uncertain economy, many Americans are finding themselves questioning their financial futures. You may wonder how you are going to pay for retirement or send your children to college without a secure backup plan in place and hire a financial adviser to help you make these decisions. The responsibility of a financial adviser is to help you plan and arrange your financial affairs. They may suggest ways to deposit money into retirement plans and savings accounts, or educate you on wills and tax treatments. However, financial advisers are surprisingly ignoring one of the most important savings plans, life insurance.
How Widespread Is the Problem?
Harris Interactive conducted a survey of 2,410 adults, 786 of whom were currently using services provided by financial advisers. Of these, 49 percent have spoken about life insurance with their advisers but 15 percent of these people said it was more than a decade ago and 40 percent revealed that the conversation occurred within the last year. However, a shocking 47 percent of people admitted that their financial adviser never even suggested life insurance or reviewed their existing policy.
The study confirmed what people had been saying for years: financial advisers are not likely to bring up or discuss life insurance during their client’s financial planning struggles. But why? Financial advisers have an opportunity to help individuals fill a gap in their future financial savings plan and, by doing so, they differentiate themselves from their competitors who are no longer offering these services.
The survey also concluded that four out of five adults who have both a life insurance policy and a financial adviser admitted that they would like to switch policies for additional features that they are not currently receiving. However, 30 percent said that if they were diagnosed with a terminal illness, they would like to have the option to receive the life insurance benefits as income. Payments for long-term care needs would be beneficial for 28 percent of the participants, and 18 percent believe that their premiums should be waived if they become disabled.
Customers are beginning to want more from their life insurance policies but with the rise in healthcare costs, these customers are currently uninformed about the way these policies work. This would be a great opportunity for financial advisers to step in and clarify any misconceptions.
Why Life Insurance?
While most investment or retirement plans assume you will live long enoughto receive your money, a life insurance plan is a smart move should you pass away unexpectedly. How will your family continue to survive, especially if you were the only provider in the household? How will your children be able to go to college? Will your spouse be able to retire as planned? There is also a chance that your assets may be liquidated for income since there is no insurance payout to cover your family’s expenses.
While there are a few different types of life insurance, they are purchased for roughly the same reasons. The payouts can provide money for both immediate and long-term expenses, as well as protect any assets you have set aside for the future. Life insurance can help the surviving members of the family pay for your medical expenses, funeral costs and settlement rates. Plus, life insurance can help replace your income to pay for everyday expenses such as food, gas, housing and utilities without tapping into your savings account or assets.
What to Bring Up
Life insurance is an integral part of financial planning. Whether you sit down with your financial adviser to discuss your life insurance plans or not, there are some factors you need to consider when you re-evaluate your insurance coverage. Think about your household composition when you purchased the plan and whether or not it has changed. Have either you or your spouse gained or lost a job? Make a note of whether there have been any substantial changes in your savings account or if you have accumulated any debt that could affect how much life insurance you need.
If you have purchased a term life insurance policy instead of a whole life or universal life policy, you need to know how long the term lasts and whether or not it will cover your family until your children are old enough to support themselves. Your policy should also protect your spouse’s retirement savings.
Discuss your financial future with your spouse and if you foresee any changes. Make sure that you and your spouse agree on a beneficiary. This person should be able old enough and responsible enough to manage the money if you should pass away today.