Insurance

Life Insurance; noun; providing for the payment of a sum of money to a named beneficiary upon the death of the policyholder or to the policyholder should he reach a specified age.

Random House Dictionary page 828

“In a person’s relationship with other human beings, a set of emotional or sentimental alternatives are created that cannot be measured in moral terms or supplanted by material things. A human life may be capable of artistic achievements that contribute in unique ways to the culture of our society.

Such values, however, are not the foundation of life insurance. Although nonobvious to these values, in fact, life insurance transaction has strong moral and social overtones. Life insurance is concerned with the economic value of a human life, which is derived from its earning capacity and the financial dependence of others on the earnings capacity. Since the economic value may arise out of either family or business relationships, it seems advisable to discuss the function of life insurance under two headings: “the family purposes” and “the business purposes”.

Book Life Insurance McGill’s by Edward Graves

The starting point of every life insurance discussion is “why should I have life insurance?” The list of ultimate reasons for life insurance is long and keeps growing. 

1. A parent
2. An education
3. A safe and loving home
4. Ongoing good health
5. A loved one
6. Time with your children
7. Long-term care needs a new item
8. Paying estate taxes
9. Not paying income tax
10. Additional retirement
11. An option on your current good health

When a key family member passes away, every item on this list can come into play in one way or another and it is for that reason that life insurance was created. The sad consideration is most families do not go out looking for life insurance the life insurance agent must find them and convince them in any one of the 11 items above as to how it could drastically change your life.   One example happened in the last two weeks when a 26-year-old father dies of cancer leaving a six-year-old son and 2 4-year-old daughters.  The mother now must find a way to fill in all the 11 items with her two hands and little money.

Once we accept the fact that life insurance is needed, the acquisition process begins and is a trying undertaking:

The List:

 How much life insurance is enough?

                  -More than you think

What kind of life insurance is appropriate?

                  -Term or cash value

What insurance carrier do I want to work with?

                   -A or better

How much is it going to cost?

                  -Varied

How long will it take for it to be in place?

                   -6 weeks to 6 months

Do I have medical problems?

                   -Your health is a key factor

How do I get my doctors involved?

                  -Will need his records

What is the objective of the underwriters and the insurance company?

                  -To make money

Other considerations:

• US Tax code &7702 Life insurance contracts
• Tax-deferred gains
• Not taxable upon distribution upon a person’s death.

Original definition from Random House dictionary defined payment at a specified age.

Also known as an annuity contract, this is a subset of life insurance and has special tax treatment.

Frank D. Tehel CFP®