Pablo Oliva With Integrated Financial Solutions Details the Big Question…”Who Really Needs Life Insurance?”

 

The answer: most of us. Whether we have loved ones who are financially dependent on us, a mortgage, student loans, business debt or just not enough savings for final expenses, insurance is important. Life insurance is a risk management tool and the foundation to a sound financial plan. A 2018 LIMRA Industry study found that almost 60% of Americans are covered by life insurance yet 1 in 5 reported they do not have enough coverage. Most participants overestimated the cost of insurance, in fact millennials overestimated the actual cost by over 500%. Life insurance is a conversation most do not want to have but need to have. After all, there is a reason for the saying “the only two things that are guaranteed in life are taxes and death.” I am going to share two cases studies that show how I helped two of my clients implement life insurance at two different stages of life.

Meet Jaime-

Jaime is a 32-year-old male non-smoker who is in good health and has a salary of $120,000 per year. What is important to Jaime? Taking care of his two children (2 and 6), paying off his mortgage and any outstanding debt. If Jamie were to have an untimely death, he would want the following:

• Provide $1,000 of income per child, per month, until age 20- $384,000
• Pay off his mortgage- $200,000
• Pay off two vehicle loans- $40,000
• Final expenses- $15,000

Jaime has a total need of $639,000 in coverage. Work provides him with a group policy for $139,000. Jaime tried to bundle life insurance with his home and auto insurance and shopped two captive insurance agents (representatives who sell their employers’ proprietary product) yet he could not find a premium that he was comfortable with. In all cases, the agents suggested he purchase 10X his salary or, $1.2mm of coverage. Jaime only needs to purchase an additional $500,000 in coverage. Anything above would over insure him at an additional and unnecessary cost. Jaime purchased a 20-year-term policy for $61 per month and now has peace of mind knowing that his loved ones will be take care of.

Meet Gil and Tammy-

Gil (57) and Tammy (56) are planning on retiring in about 10 years. Gil will be drawing income from his retirement assets and Arizona State Pension, as well as full social security benefits. Tammy will also collect her full social security and income from a property she inherited from her late mother. Between the two, they will generate about $6,000 per month. The bulk of their income will come from Gil’s social security payments. Gil is set to collect $2,800 per month and Tammy $1,000. Should Gil pass before Tammy, she would collect the higher amount but would forfeit her $1,000 benefit, creating an income gap. The solution to this is as follows, Gil purchased a $250,000 permanent policy for about $125 per month. The additional coverage is enough to generate the additional income needed for 25+ years should he pass before Tammy.

As always, please reach out to with any questions regarding life insurance or to review your current coverage. You can reach Pablo Oliva at poliva@myifs.com