23 Aug IT’S TIME TO REVIEW YOUR INSURANCE!
September is National Life Insurance Awareness Month
When was the last time you looked at your life insurance coverage? Why not do it now? September is as good a time as any – in fact, this is National Life Insurance Awareness Month. The non-profit Life and Health Insurance Foundation for Education (LIFE) wants to awaken Americans to the need for life insurance, and its remarkable utility as an estate planning and tax-saving tool.
What? You don’t have insurance? You’re not alone. According to LIFE, 68 million adult Americans have no life insurance coverage. (That means about 30% of us.) In September 2008, a LIFE poll found that 27% of adult Americans would be willing to cancel their life insurance coverage to save money in hard times.1,2
Watch a life insurance commercial, and you’re likely to see a young or maturing family. However, this is hardly the only context in which life insurance matters.
- It can be a vital part of a financial strategy for empty-nesters who want to retire to a comfortable lifestyle.
- A buy-sell agreement funded with life insurance allows a surviving business owner to buy the company interest of a deceased owner at a previously established price. Key-person insurance can aid a business if a core employee passes away. (It is possible for a business to fund a buy-sell agreement and key-person insurance with pre-tax dollars, making these moves truly tax-efficient.)
Your only way to send money to the future on a tax-free basis. Some people buy a life insurance policy and name a son or daughter as a beneficiary. This thoughtful decision has one little downside. If you own the policy, the death benefit is included in your taxable estate.3
You have an alternative here. You don’t have to own your life insurance policy. Your children (or other beneficiaries) can own it. If they do, they will receive a large payout free from federal estate and income taxes when you pass away.3
You can make gifts to your kids to acquire the insurance, and your kids can pool their money and buy policies on Mom and Dad. The more kids you have, the less the premium burden. Not only that, some policies can build up cash value (tax-free growth within the policy).
Here’s another way to remove life insurance proceeds from your taxable estate: an irrevocable life insurance trust. You can have the trust own the policy, and you can periodically fund the policy through gifts made to the trust. The trust will get the proceeds from your policy when you die, and those proceeds can be distributed according to your wishes – they can go to your loved ones or charity, they can be used to pay estate taxes.3
Insuring yourself may be cheaper than you think. Let’s say you just want term life, just basic life insurance without the capability to accumulate cash value. Well, good news: the Insurance Information Institute found that premiums for standard-risk term life insurance fell 50% between 1994 and 2007, corresponding to reduced mortality rates.4 Not only that, the Institute says term insurance premiums have fallen by more than 4% per year since 2000. (For the record, premiums on cash value policies are about 5% lower today compared to a decade ago.)5
Are you adequately insured? Are you using life insurance smartly? Life insurance is a great tool to estate planning: there are so many ways you can use it as you plan to pursue your goals. Whether you simply need to insure yourself or need to protect your estate through sophisticated planning, September is the month to think about life insurance – and all the ways it can potentially help you financially.
Kevin M. Nast is a Financial Advisor and the President of NastGroup Financial in Northville, MI 48167. He may be reached at nastgroupfinancial.com or 248.347.1888. Kevin also services clients in Belleville, Brighton, Livonia, Canton, Wixom and the surrounding metro Detroit area as well as 13 additional states across the US.
Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Securities products and services are not offered through TFA.
These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.
LD33777-09-09
Citations.
1 lifehappens.org [9/1/09]
2 lifehappens.org [9/18/08]
3 wellsfargoadvisors.com [9/3/09]
4 msnbc.msn.com [5/29/07]
5 registeredrep.com [8/19/08]
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