However, choosing the best life insurance policy allows you to plan for taking care of your loved ones and to have adequate coverage for them. Planning is an easy way to prevent financial hardships that can happen without the protection of life insurance.
If you are a business owner, you have your own household’s needs to review as well as determining the best disposition of your business. If your total estate is valued at certain levels, you may need to determine how you will cover the expense of estate taxes within less than a year after death. It is also important to understand tax implications, varied investment performance, and effects of inflation. This will help identify and plan for how to manage gaps in maintaining your desired financial picture.
Next, you can begin searching for available solutions to accommodate your needs. Once a gap or need is identified, there are generally two types of life insurance available: term life insurance or whole life insurance. These options should be analyzed on a case-by-case basis. You can also consider variations of these that may offer fixed interest rates, individual investment and index options for cash accumulations, and guaranteed level increases or flexible premiums spread over a few years or your lifetime. You should not only be focused on the immediate need you have for coverage today but on ensuring that you will have adequate coverage for the future.
You also need to consider your overall asset allocation. When deciding what to do with company stock, focus on your total portfolio investment objectives, asset allocation and Chevron’s future prospects. The rationale is that an “in kind” transfer may raise your portfolio’s risk and volatility, making it riskier, at a time when you probably want to reduce risk, especially as you near retirement. If you take the Chevron stock as shares, you may have to adjust your retirement portfolio’s asset allocation to help keep its risk level in check.
Here’s a simple example of an NUA strategy. Assume you’re age 60 and planning to retire soon. You expect to be in the 35% tax bracket after you retire. You have a $600,000 balance in your ESIP account — $400,000 in Chevron stock with a cost basis of $100,000 and the remaining $200,000 in various Vanguard mutual funds.
Finally, you must determine a process for implementing your coverage. Some people believe that they will be healthy 10 or 20 or even 30 years from right now. Unfortunately, this may not be the case. It’s crucial not to delay securing coverage because you will find it easier to obtain more affordable coverage options when you are younger and in good health. The reality is that if you wait until you actually need insurance, in most instances, you won’t be able to afford it or even qualify for it. Locking in current rates while you are younger and healthier can save thousands of dollars on more expensive premiums when you age.
