I wanted to share some important insights from a recent conversation I had with a client regarding her life insurance policy and upcoming premium payments.
Background: This client lost her husband a couple of years ago, and since then, we’ve implemented solid planning to ensure she and her family are financially secure and relieved of the stress associated with financial decisions.
During our review of her flexible premium life insurance policy, we discovered that the performance of her cash account over the past five years allowed us to skip her premium payment this year. This decision won’t disrupt her death benefit or the overall strategy! The result is a budget windfall, increased gifting potential to her children, and tax savings by avoiding investment gains that would have been realized to cover the premiums. A true win-win!
Details matter. Life insurance policies can be complex, and it’s crucial to understand the various strategies available. Many policy owners may not realize there are two ways to calculate the death benefit:
A. Level Death Benefit
B. Increasing Death Benefit with Cash Value
This decision must be made at the time of application. If a level benefit is chosen (which comes with lower premiums), the cash value balance essentially gets surrendered when the insured passes. So, why maintain a large cash value?
Consider using the cash value to cover annual premiums and maintain the contract. Please remember, this story is specific to one situation and should not be considered general investment or insurance advice. I strongly recommend discussing your options with your financial planning team before making any decisions.
If you don’t have a team to consult in these matters, please feel free to reach out to me. I’d be happy to discuss how I can help.
Remember, it’s WYK that matters (What You Keep, I'm trying out a new tagline).
Phil
#LifeInsurance #CashValueLifeInsurance #WealthProtection #EstatePlanning #InsurancePlanning #WealthPlanning #ComprehenivePlanning
"The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications."