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A Life Insurance Q&A
By Deborah A. Cary
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At one point or another, you've probably given life insurance some thought. And, if you're wondering how much is enough, you're not alone. The fact is, determining life insurance needs is not just a matter of simple arithmetic. It requires you to take an objective look at your current needs and your future goals. This is where a "needs analysis" can be of great importance.
A needs analysis is conducted by a qualified insurance professional, and helps you determine the future short-term and long-term financial needs of you and your family. By answering a series of questions, you'll be able to identify your needs and ultimately design a plan to assure that money will be available to meet those objectives. The process can guide you to identifying specific areas of concern and help you establish your financial priorities, as well.
Emphasis on Personal and Family Needs
For most people, needs typically revolve around attaining and maintaining a comfortable lifestyle. This often translates into a home, higher education for your children, time and money to enjoy leisure activities and, last but not least, an adequate retirement.
While saving and investing will undoubtedly be part of your overall long-term investment strategy, it takes time to accumulate a pool of capital. One advantage of life insurance is that it protects you today, before you've reached your financial objectives. It provides financial relief for your family in the event of an untimely or unexpected death, which would otherwise deprive you of the time required for wealth accumulation.
A complete needs analysis helps determine what is important in creating and protecting the lifestyle you and your family enjoy. Even if current income doesn't stretch far enough to satisfy all of your future financial objectives, the needs analysis process will help you establish and focus on your priorities.
Your insurance professional can guide you through this comprehensive analysis to identify your goals and to show you how life insurance can help meet each of your objectives. By initiating a plan of action, you can create an estate that will provide financial assets should you no longer be able to do so yourself.
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Insuring Your Child's College Education
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Few would argue with the value of a college education. Our economy increasingly favors college graduates for the best jobs. Technological change at an accelerated pace is requiring a more knowledgeable and skilled workforce than ever before.
Meeting college costs is a major concern of most parents. Beginning to accumulate capital while children are still young generates funds over an extended period with less stress on family budget from year to year.
Some external resources are available to help. These include scholarships, grants, loans, and work-study programs.
For many young people, their parents' contribution is usually the most significant element in paying college costs. Here are some tips on preparing for this major expenditure.
Work methodically through a planning process that evaluates your financial situation in detail. What are the family's assets, income, living expenses, debts, future needs, projections on future liabilities including college costs. How many children will need to go to college? How close are they in age?
Does the family have life insurance, to provide for income in the event of the death of a breadwinner?
Here are the key components of a thorough family financial analysis:
a. Details of existing financial status
b. All financial goals and objectives
c. Summary of education funding goals- how much money will the family need and how soon.
d. Data on number of children in the family, their ages, expected dates of college attendance, amount of resources now allocated for educational cost.
When completed, your plan should point to additional resources that parents will need to fund education costs.
Options include regular savings or purchase of stocks or other securities for long-term growth. A permanent life insurance policy may also supplement that plan. Life insurance provides tax-deferred growth of a cash value that can be drawn upon in the form of lower-cost loans*.
Life insurance also provides an immediate and income-tax-free benefit payable upon the death of the insured, helping to assure available funds for education costs in the event of the death of a family wage earner.
Deborah A. Cary of MassMutual Life Insurance Company and Affiliates Springfield, MA 01111-0001 Registered Representative of and securities products and investment advisory services offered through MML Investor services.
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