Evaluating Life Insurance: How Your Financial Advisor Can Help

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Evaluating Life Insurance: How Your Financial Advisor Can Help

When thinking about their insurance needs, most people immediately think of health insurance, auto insurance, and home insurance.  Yet, fewer individuals consider the importance of having a life insurance policy.  In fact, according to 2016 statistics, 30% of Americans had no life insurance at all last year, a record low not seen since 2010. (http://www.prnewswire.com/news-releases/limra–nearly-5-million-more-us-households-have-life-insurance-coverage-300335782.html) Among those who do have life insurance, a third are insured through group plans, and according to a recent survey, 70% of those with life insurance felt that their coverage was insufficient. (https://www.bestliferates.org/blog/2015-life-insurance-statistics-and-facts/)

So, why are many Americans going without life insurance? Well, the main reason is due to perceived cost, which individuals tend to overestimate by as much as 300%.  Another major reason is that many fail to see life insurance as part of their overall financial strategy and do not make it a high priority, choosing to focus on paying off debts or saving for retirement instead. (http://www.prnewswire.com/news-releases/limra–nearly-5-million-more-us-households-have-life-insurance-coverage-300335782.html)

In particular, young people tend to think that they don’t need life insurance. While it’s true that those who currently have no dependents probably don’t need a policy, as young people get married, have children, or start their own businesses, life insurance will become an important part of their financial strategies.  In many cases, age is used in calculating premium rates, so taking out a policy at a younger age can be cheaper than getting one later in life.  Additionally, health status is used to determine premiums, and many policies require a medical exam.  Individuals who have high blood pressure, high cholesterol, diabetes, or other health problems are likely to be assigned to a higher premium rate than those who are healthy. As the likelihood of these conditions increases with age, taking out a policy at a younger age may enable one to get a lower premium rate.  

For those young or old, life insurance can be an integral part of any overall financial strategy.  It not only pays for funeral expenses, it also covers outstanding debts, replaces lost income for loved ones, and can be used to leave an inheritance by listing heirs as beneficiaries.

In order to integrate life insurance into your financial plan, it’s important to consult with a financial advisor.  The life insurance marketplace can be confusing, and there have been many changes in recent years.  A financial advisor can help you in considering a policy or reviewing an existing policy and will offer you personalized advice on adjustments you may wish to consider.

Let’s explore a few of the ways in which a financial advisor can assist you with life insurance.

Applying for a policy

If you’re planning to purchase a new life insurance policy, a financial advisor can help you navigate the market and determine which companies and policies may be best for your unique situation in the short and long-term.  He or she can advise you on the most effective policy types, such as term life or whole-life, and can also assist you in finding a policy that provides maximum coverage with minimal premiums, particularly if you have a health condition.   

Understanding your policy

Having a life insurance policy that you don’t understand can be as risky as having no policy at all.  Financial advisors can help you gain a sense of confidence and control, going over the wording of the policy with you, explaining the premiums and benefits, and answering any questions you may have.  Your advisor will also help you understand your current coverage level and whether this is sufficient for your needs.  For example, he or she can help you understand and evaluate how your policy will cover final expenses, ongoing living expenses, outstanding loans, future educational expenses for your children, and business continuity expenses.

Reviewing your policy performance

In the challenging economic climate of the last several years, life insurance policies have often struggled to perform as well as they did in the past. Many existing policies, and their underlying investments, are currently performing at lower levels than those which were originally projected. Some of these policies may be linked directly to interest rates or market performance.  In these cases, it is vital to review the policy performance with an advisor so that adjustments can be considered to preserve the policy performance over the long-term.  Additionally, those who are over 50, are self-employed, and have had a policy for more than 10 years may benefit from review. Policies should also be checked after any major life change to ensure that they still provide enough coverage.

Replacing your policy  

After looking over your life insurance policy with your financial advisor, it may be determined that you would benefit from getting additional coverage or switching to a new policy.  If this is the case, your financial advisor will recommend ways to increase your coverage and provide you with the details of new policies which you may wish to consider.  If you decide to alter your policy or start a new one, your advisor will be ready to assist you throughout the entire process, ensuring that you understand everything and that your policy provides you with maximum benefit.    

In today’s uncertain economic times, a life insurance policy is arguably more important than ever.  With so many policies available, it can be very difficult for individual consumers to choose the policy that will truly be sufficient for their long-term needs.  Seeking assistance from a financial advisor will allow you to navigate the market with confidence, ensuring that the policy you choose best fits your overall financial strategy and offers you and your family the most confident long-term protection.  We wish you all the best in finding the ideal life insurance policy for your needs!

For information about specific insurance needs or situations, contact your insurance agent or financial advisor. This article is intended to assist in educating you about insurance generally and not to provide personal service.

Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

Please note this article contains hyperlinks to additional content. The information being provided is strictly as a courtesy. We make no representation as to the completeness or accuracy of information provided at these web sites.

Winnie Sun is a registered representative with, and securities offered through LPL Financial, memberFINRA/SIPC. Investment advice offered through Sun Group Wealth Partners, a registered investmentadvisor and a separate entity from LPL Financial.