Is Life Insurance Part of Your Risk Management Plan?
By Gina Jordan
Tallahassee, FL – This is Financial Planning Week, and it comes on the heels of Life Insurance Awareness Month. As Gina Jordan reports, protecting loved ones in case of premature death is considered critical to anyone's life plan.
Bob Lotane is a spokesman for the National Association of Insurance and Financial Advisors Florida. But he doesn't just recite the company line about the need for life insurance. He's lived it. His wife Robin died of cancer in July. She was 48.
"When she was terminal and when she really needed extensive care and somebody to be there all the time, I was able to leave my job for a couple of months and not worry about it, and just take care of her."
Lotane had the money to pay all the medical expenses that weren't covered, he didn't have to worry about the cost of his wife's funeral, and Robin's college age son will be able to pay for his education and buy a home when he's ready. But many grieving survivors find themselves wading through bills that they have no money to cover. Lotane says many people are woefully underinsured.
"You can say, you know, $100-thousand or a half a million dollars and it sounds like a lot of money, and it is a lot of money, but when you really look at the types of costs that can be attended with somebody passing away or having an accident, and the costs of being able to put kids through college, be able to protect your future, be able to leave a job to take care of somebody, suddenly that really can not necessarily be a lot of money."
But life insurance is not for everyone. The breadwinner of the family who has young dependents may need a million dollar policy while an older person whose children are grown may need none. Denny Axman is a certified financial planner in Jacksonville who spent much of the last four decades working on estate and business planning.
"Life insurance would come into play when someone stands to have an economic loss based upon their human life value, and that is normally prior to your retirement age. Beyond retirement, there is a need in many cases, but certainly not in all cases, for life insurance in the estate and business planning area for tax-favored benefits for trusts and for family members and for businesses if it's structured properly."
Tiffany Reeves says the biggest mistake people make when evaluating their insurance needs is not realizing that things change. As an outreach coordinator for the Florida Department of Financial Services, she helps consumers understand how to manage their risk.
"You should retain the losses that you can afford, and you need to insure the losses that you can't. So a fender bender, you know, that's a smaller loss. That may be something that you consider self-insuring. But when you have a larger loss, a catastrophic loss to your home, property, life, those are things where insurance plays an important role for you because liability carries a tremendous risk, and if you don't have the correct insurance coverage that's going to help protect that risk, your family can be the ones that really suffer in regards to financial loss and financial security."
Reeves encourages everyone to assess their risk based on loss of income, loss of property, and loss of assets. She recommends sitting down with a licensed professional to determine what's best for your family, and periodically evaluating your risk management plan to see what should be changed. Bob Lotane knows there are inevitable expenses before and after someone passes away.
"You can buy a life insurance policy that really is pennies on the dollar comparatively with the kind of money that it will provide to perhaps alleviate these expenses and protect other people, and to pay medical expenses or to allow somebody, it could allow somebody to leave their job to take care of you. If you don't have a long-term care policy or a disability policy, they're going to have to hire somebody to take care of you. I can assure you those expenses are monumental."
The Financial Planning Association offers twenty ways to celebrate Financial Planning Week. On the list of suggestions: balance your checkbook, get your will and other estate documents in order, and review your insurance coverage.