What’s your plan? (02/28/2018)

Scott Arens | Scott@arenscp.com

February is Insure Your Love month and we are honoring this tidbit by talking about insurance.  Let’s pick up from where we left off last week.  Our topic is life insurance.  I had asked you to consider if you needed it, how much you needed, and what type?  If you can’t answer these questions you haven’t done your homework and your plan isn’t as strong as it should be and therefore you will be neglecting loved ones.  I will say that life insurance is important to you!  If you seek other’s advice, you will receive their yes or no answer based on what’s in it for them.  So, take it with a grain salt; in Latin the word for salt and wisdom is the same.  The last few years has seen a discussion in the insurance industry concerning ethics and just how much of the client’s best interest the seller has in mind.  This “Department of Labor (DoL) Fiduciary Rule,” would put more laws on the books by expanding the Employee Retirement Income Security Act (ERISA) and shifting from the old ‘suitability standard’ to a new ‘best interest standard.’  The Scott Arens take; let’s make the client richer than the brokers or agent.  I have always found it a good practice not the cheat customers.  Again, yes you do need life insurance and it needs to be in your best interest.  Life insurance comes in all shapes and sizes.  So, let’s keep it simple and focus on building a plan.  Our choice in type of insurance will be term or whole life.  Term is the cheapest and will give you a specific amount of coverage for a specific amount of time.  Whole life does the same thing and adds a savings component or ‘cash value’ to the protection.  You will be buying the insurance and establishing your own bank when you take out a whole life policy.  You might also benefit from using a combination of both to serve your needs.  Please be aware that the younger you start the better.  Premium costs are lower when you start young.  You are less likely to pass on a large cost to the company the more years you have the death benefit in place and therefore lower the cost for the company to do business with you over a longer period of time as you pay the premium.  And the money that you exchange for the coverage grows because of compound interest.  The magic of compounding your money is said to be one of the most powerful forces in investing.  This will provide for quite a little nest egg for future use.  Another benefit with a whole life policy is the ability to take a loan and draw money from it.  What does Disneyland, McDonald’s, and JC Penney have in common?  Walt Disney, Ray Kroc, and James Cash Penney used their whole life insurance loans for their businesses.  There is also a hazard in waiting.  You could experience a life event that would place you in the uninsurable category and keep you from the benefit of life insurance.  I do appreciate you reading my column here at the Pioneer Review.  I enjoyed the anniversary edition last week!  Please leave me your feedback at Scott@arenscp.com ■

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