Life Insurance

Life insurance can provide three main benefits:

1. Protection
2. Effective Estate Planning
3. Generational Wealth

Protection

When protection is your main reason for purchasing life insurance, you’ll want to sincerely consider a term policy. A term policy protects your loved ones financially within a specific time-frame, for instance, when you have young children and you’re paying a mortgage on your home. Such a policy would shield your family against a catastrophic loss of income event. In essence, when your objective is protecting your loved ones, life insurance should not be viewed as an investment vehicle, but rather a means of safeguarding the ones in your life who matter the most.

Estate Planning

When the time comes to approach estate planning, reducing overall tax liability is often a primary aim. Thankfully, you have an invaluable tool. Without question, one of the best choice is to use a permanent life insurance product. The reason? The proceeds from a life insurance payout is entirely tax free. When choosing a permanent life insurance product, you generally have two options:

1. A single-premium, paid-in-full policy
2. A traditional monthly or fixed-term payment approach

Naturally, the best choice depends on your situation. Oftentimes, it’s based on a person’s personal liquidity. Do you have the cash on hand to make a lump-sum payment? How much leverage do you gain by using the life insurance policy?

However, the real key in estate planning is to make the policy’s beneficiary a person or entity outside of your estate. One possible strategy is to designate a trust as the receiver of the insurance proceeds.

The main advantage of using a trust is simple. After you die, you still maintain control over your assets. Often a person will do this if they want to pay the taxes on the estate from the trust in order to keep an asset intact so it doesn’t have to be sold, like a family home or business.

Otherwise, you may decide to leave the benefits of a life insurance policy to an individual if you want to give them the flexibility to use the insurance money however needed.

Building Generational Wealth

Historically, wealthy American families created generational wealth by buying life insurance policies and leaving the proceeds to a child or grandchild. Doing so ensured that when the parents died, a large sum of capital was passed down to the next generation. A more modern approach would be to first build up assets in a permanent policy and then take loans from the policy to make major purchases (i.e., a car, or home). Essentially, this allows you to become your own bank––you borrow money from yourself, and you pay yourself back in the life insurance policy. It’s a great tool for people who want to avoid taking on additional debt. Not only are you borrowing money from yourself, but you’re doing so in a disciplined way. 

Long Term Care

This is a very complicated financial planning issue and needs very specific information to make sure this makes sense in your situation.

LTC has 2 places that make the most sense:

1. Those who have too few assets
2. Those who have a lot of assets

Purpose: Someone else is going to pick up the $118k/yr check for the last 18mo or 2 years of your end of life till you die. Main Question: Do you really need LTC Insurance or not?

Varies year by year with the plans that are out there.

LTC never end up paying out because insurance companies jackup the rate.

Estate Planning: Can address #2 (above), those who have a lot of assets to protect.

Home Insurance

Home Insurance is the one of the nost powerful pieces of insurance most people have.

Reasons:

1. Primary Reason: 1:1000 risk of house burning down in any given year. That’s why you have home insurance, so someone else can take on that risk. What you have to decide is how much risk are you willing to absorb in the form of a deductible. The reason why this is important is because you’re telegraphing to the insurance company how likely they are going to have to pay out on this policy.  This is why the deductible is so important and so powerful.  If you want a low deductible you’re telling the insurance company that you are very likely to make a claim.  If you have a ridiculously high deductible, you’re basically telling the insurance company you will probably never make a claim on your home insurance. As a result, you’re going to get a much better rate.
2. Comes in with Liability Protection. You can have a home policy have a rider that is a personal liability protector that will protect you if you create an egregious act on someone else. Lots of things you can do with home insurance that are really neat.
3. Home Insurance is extremely customizable. i.e., if you’re older and have a $6-$10k set up hearing aids, you can have that covered on your home policy with a special rider. Jewelry, DJ equipment, etc.
4. You can have an in-home business coverage. You can have a policy that allows you to rent part oof your home to your business or to a 3^rd party.

Auto Insurance

We strongly recommend people keep the highest level of automobile insurance that they can afford.

It’s not about the difference between paying $10/$20 more month on the policy, it’s about not being bankrupt in an accident that you’re at fault. i.e., in VA, the average automotive lawsuit settlement is over $400k. WOW. That means half are above and half are below.

Umbrella Insurance

Umbrella Insurance generally extends the amount of coverage on your other policies and this just gives you a cheap additional protection.

This extended coverage usually applies to home, auto, and business liability coverages.

In a general sense, Umbrella Insurance is the most affordable insurance you can get for the coverage amounts offered.

Remember, if you get sued or have a problem, you have to go through your primary insurance first, before you ever get to the lability policy.