We can spend a lot of ink in this blog correcting misinformation that appears in the popular press about life insurance, why it’s important and who needs it. So it’s refreshing to be able to link to an article that provides a load of great information for navigating a topic that can, admittedly, be complex.
Christine Dugas and Sandra Block of USA Today wrote the article “
Have Life Insurance? Is It Enough or Maybe Too Much?” in which they highlight some of the common mistakes that people make when buying life insurance. The first mistake that they bring up doesn’t make it into bold lettering, but may be one of the most important: “too often parents make a quick decision, ignoring important considerations.”
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I like to call them gifts of a lifetime. After I made sure my own financial plans were in order many years ago, I bought two small whole life policies for my two daughters. I recently carried the tradition on with my grandchildren.
Such insurance purchases are gaining some attention during these volatile economic times, notes Jilian Mincer in a recent Getting Personal column for Dow Jones Adviser, entitled “More People Buying Life Insurance For Children.”
Why the uptick? The reason is simple: a whole life policy that builds cash value is a way to provide a solid financial foundation for your children and/or grandchildren while simultaneously locking in life insurance coverage for their entire life. Buying whole life for my grandchildren allows me to expose them to one of many prudent options in someone’s financial toolkit. It is by no means their only financial tool, but it makes sense to use the living benefits that a protection product like whole life insurance offers. The cash value that accumulates in a whole life policy can be used for college tuition, a mortgage on a first home, or a nest egg for a grandchild’s own retirement. Importantly, it also provides a death benefit for their families if a tragedy should occur.
By securing policies for my grandchildren, my wife and I know that when we are no longer around, our grandchildren, and potentially even their children, will carry a little piece of us with them as they build their own financial future for their families. For a few dollars a month, I am leaving a legacy, and that’s a gift I will always be proud to give.
Ronald B. Lee, CLU, ChFC, CLTC, is a co-general agent of Lee Nolan Associates LLC, a general agency of the Massachusetts Mutual Life Insurance Company (MassMutual).
I received a phone call from a person I had never met to review his insurance. He had recently moved from California, had a 1-year-old baby and felt he needed to replace his group term life insurance, which his company had reduced after recently being acquired by another firm.
I spent time with him and his wife reviewing their financial needs and asking a series of questions about their current and future goals, and then I suggested they go to LIFE’s online Life Insurance Needs Calculator and the Human Life Value Calculator on the LIFE website. We scheduled a follow-up appointment for the next week.
When they returned to my office, I asked if they had run their own numbers based on their requirements. They had, and they determined they needed substantially more life insurance than they currently owned, including new coverage on both the husband and wife, along with a small policy for their baby.
While I guided them through the decision-making process, they determined the amount they actually needed. It worked out to be a similar number to what I had originally calculated, but now it was their number, not mine.
If you are unsure about how much life insurance you and your family need, check out these insurance calculators on our website. It may be one of the best decisions you make for your family.
I recently ran across a yellowing sheet of paper with a typewritten letter; it was a copy of a note I had sent to my son. The date on the letter was Nov. 21, 1989, and my son, who is now in college, was just four months old at the time. As I read it again after 20 years, I realized something: Although I was telling him about the life insurance policy we had just purchased for him, it was, in fact, a love letter.
Love letter, you say? What has life insurance got to do with love? Well, quite a lot, it turns out. The bottom line is that you buy life insurance because you love people and want to protect them financially.
I may be biased because I work in the industry, but take a look at the letter to my son, and see if you don’t agree:
Dear J.P.:
Today is November 21, 1989, and possibly you are wondering what the date has to do with writing you this letter.
While you are only four months old at the present time, I hope that this is a date you will remember, because today we purchased for you a life insurance policy. It is one like we have and it will be for your use for the rest of your life.
J.P., the difference between financial success and failure is often determined by whether or not a person can discipline themselves in a consistent and conservative financial strategy. Life insurance is ideal in this respect because it has withstood the test of time both for family security and savings; it’s the greatest savings plan in the world because IT WORKS!
It may be that you will have to call upon the cash value of this policy many times during your lifetime and, at such time, we hope you will remember that we started this for your benefit.
This policy carries with it two features of particular significance. The first is an automatic purchase option, which will allow us to increase your coverage as you attain certain ages. The other feature is one that has been very meaningful to me in my financial life and it is called disability waiver of premium. This means that in the event you should ever become disabled, your financial plan will be self-completing for you and your family.
This policy is a special gift of love and affection from both your mother and me; and we suspect that it will be remembered long after all other gifts are forgotten.
May God’s blessings be with you always.
Love always,
Dad and Mom
As Valentine’s Day approaches, why not consider the gift of life insurance? It may be a policy like the one I purchased, for a child or grandchild, or it may be a policy you buy for yourself with your loved one as the beneficiary. We express our love in many ways, and offering financial security is most certainly an important one. Click through to www.insureyourlove.org to find out how you can do it, too.
With the holidays upon us, everyone is looking for the perfect gift, especially for their children or grandchildren. US News and World Report published an article on its website listing six financial gifts you can give a child that will make future holidays even brighter than this one. Here’s a quick summary of what author Emily Brandon suggested:
A 529 plan: This is a college savings plan—either a prepaid tuition plan for a specific college or an education investment account.
A Roth IRA: If your child is working and earning an income, you can put “matching” money into a Roth IRA, up to $5,000. The money grows tax-free because your contributions were made with after-tax dollars.
A savings bond: This is great for teaching the power of compound interest and investing for the long-term.
Cash: Cash is always great! (But remember, once it is spent, it’s gone – with no lasting memory.)
Financial advice: Use a non-family financial professional. This is especially good for adult children who are trying to get their feet on the ground.
A piggy bank: A bank is an excellent first experience for putting away money instead of spending it.
What the article didn’t mention was the gift of life insurance. A policy that parents or grandparents give can become a lasting gift for the child’s financial future. It can provide cash for college, a new home, a new business or for changing family and financial need, money for emergencies when it is needed most, and protection of the child’s insurability.
Sure, there may be no need for insurance protection today, but there will be in the future. A small policy with a guaranteed policy purchase option for additional insurance in the future may be a gift that can never be duplicated if the child develops health problems.
Think about it. Would you like your grandchild to remember you forever? A gift of life insurance can do this.
