How Goal-Based Insurance Strategies Can Help Strengthen Your Portfolio
By Saghir A. Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in financial security and fulfill their religious and moral obligations towards charitable activities).
Similar to your investments, your insurance needs and related strategies change over time. As part of a small financial strategy, it’s critical to review and adjust coverage at different life stages to make sure that you are protected.
“I refer to insurance as one of the cornerstones of an effective financial strategy. You can have the best investment strategy, and you can have the best rate on your loans, but it’s also important to have the right type of protection in place. Insurance is an important asset protection tool for any good financial strategy.”
Life Stage
When you are embarking on a career, your insurance needs tend to fall primarily into the category of income replacement: helping ensure that critical expenses like the mortgage and college tuition are paid if you pass away. During this stage in life, as you’re dealing with multiple expenses and trying to build wealth, it’s important that your insurance strategies are properly aligned with your budget and timeline. You may consider term-life insurance a good, relatively affordable solution that covers you until you reach your peak earning years and when you might see an overall reduction in your expenses as well,” says Landry. He suggests a level premium term-policy that maybe 20 or 30 years.
Life Stage: Pre-retirement
At around 45 to 60 years old, it may be appropriate to think about leveraging life insurance to help with retirement planning. “Some individuals in this age range may have maxed out what they can contribute to a 401(k)on an annual basis. They may not have options from an income perspective to contribute to an IRA either.”
Individuals in this situation who have a need for life insurance may want to consider insurance strategies such as an indexed life product or a variable universal life product. Several of those products are designed to accumulate cash value in the early years of the policy. This approach is not necessarily geared toward funding a particular death benefit, but rather towards cash inside of the policy.
“The life insurance helps provide for your protection needs, but when properly structures, cash value may be assessed a part of a supplemental income strategy. In the right situation, these strategies can deliver a lot of value so as you get into retirement, you can seek to maximize things like Social Security and IRA withdraws and use that life insurance cash value as a bridge strategy.”
Extended care planning
The third life stage involves insurance strategies based around extended care needs, an area where carriers have gotten creative with solutions, options include traditional long-term care insurance, a hybrid policy that combines life insurance product with a long-term care rider. that while some people hesitate to use long-term care insurance strategies, if positioned properly they can be an effective estate-planning tool.
“The knock-on long-term care coverage is, if I never need it then I don’t really get any value from it.” But in many cases, you can marry it with a life insurance product solution. You have a life insurance product, and if you need long-term care, you can draw upon the policy, but you are able to cover your costs related to long-term care services, and if you never need long-term care, well, you have a life insurance policy that you can leverage for your estate planning process.”
Legacy planning
The last life stage is legacy planning: using life insurance strategies to create leverage-in a tax-efficient manner you can leave a gift to your reception of choice, such as a family member or charitable organization. These solutions tend to be individually tailored. Your financial advisor can work with insurance specialists and estate planning attorneys to put together life insurance solutions that can help meet your need as you move through life stages.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
