Life Insurance Decisions Made Easy

Making choices for your life insurance coverage can be uncomfortable. It makes us realize that life is finite, and this can be scary.

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.

The following steps can help you navigate the best way to select a life insurance policy:

The first step is to determine if there is a true need for life insurance. It’s important to closely examine all variables of a financial situation. This can include things like household income(s), liquid and illiquid assets, available coverages through employer(s), and existing policies. It can also include current and anticipated future expenses (for example, plans to have additional children and the resulting added expenses that may need to be addressed), desired standard of living to a preferred age, and other individual goals.

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.

The next essential step is to determine a fair price and identify the desired carrier’s financial strength for your needs. There are many options when it comes to the specific carrier you choose for coverage.

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.

Conversations about life insurance at Insight are logical discussions about managing the risks that your loved ones will face upon your death. We focus on analyzing what needs your existing assets are able to cover and determine which supplemental coverage you may want to use. In the end, it’s about being confident that your spouse or partner and children will have the quality of life that you want to provide for them in the years when you are gone. Whether you have a temporary or long-term need for managing risk, Insight can help you lay out a plan that will meet your family’s financial needs.

To learn more about Insight Wealth Strategies, please call us at (800) 318-7848, email us at [email protected], or fill out the request information form.

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Insight Wealth Strategies, LLC is not affiliated with Chevron.