HOW LIFE INSURANCE HELPS RESOLVE A FAMILY’S FINANCIAL NEEDS

Common savings habits.  Although most people use credit to enable them to make large or numerous purchases to avoid waiting until they have saved enough money, most families also recognize the need to save for the proverbial “rainy day”. Unfortunately, savings plans rarely work, without adequate and appropriate life insurance to support them. Rarely can a family save enough money (and do so quickly enough) to equal the great amount of money that is necessary to substitute for the lifetime of income that is lost to death. The reasons why common savings methods usually fail are most interesting.

Most American families simply do not save enough. “Pressing” current “needs” and desires always seem more important than future financial needs. They tempt people to spend what they have not earned. Modern families save very little They make frequent withdrawals from savings, even as their credit exposure grows. Pledges to replace the money are rarely honored.

Modern families tend to live well above their means. Modern families’ current expenses usually exceed their incomes. This can be the result of either a diminution in income (the loss of a job, for example) or poor budgeting and purchasing habits, or both.

Most investors are poor money managers.  In most instances investors avoid the cost of professional help, despite the fact that they do a poor job managing their own investments. They simply fail to achieve their objectives or lose money through overly risky investment choices. In most cases, moreover, even experienced money managers cannot provide sufficient returns in the necessary investment time period that investors select. Those comparatively few American families, that eventually adopt rigorous savings plans, simply do so far too late in the game.

Disaster strikes before enough money is saved. Another common reason for savings and investment methods failing is the death or disability of the investor. His or her income simply ceases before enough money is accumulated to meet his or her dependents’ intense needs for monetary and other support. Even as these tragic facts emerge, the family is also struck with funeral and other final expenses, taxes, unpaid mortgages and bills, and the loss of the decedent’s medical insurance, retirement and other work benefits.

Life insurance is an essential part of all savings plans. By definition, cash value life insurance is the ideal answer to the problem of putting money aside regularly and with guaranteed safety and to insure that enough is available for a family’s needs after the breadwinner’s death and regardless of whether it is untimely. A death benefit is guaranteed at the policy’s full face value from the outset.

Life insurance creates liquidity and an immediate estate for the payment of final expenses, income, estate, inheritance and other taxes, mortgage balances, and other bills. Life insurance creates funds for children’s educations, emergencies, and retirement. Policy proceeds also create a fund from which a planner can design a regular income stream to substitute for the decedent bread winner’s lost income.

Cash Value Insurance provides living benefits. When a person or family needs money for emergencies or to pursue opportunities (business start-up or development, education, for a better career, etc.), cash value life insurance provides collateral for guaranteed policy loans and for withdrawals. Upon retirement (if circumstances so dictate), the policy-owner can use his cash value to supplement retirement income and other financial needs.

Life insurance guarantees that the savings plan will be completed. Unlike other plans for accumulating money for a family’s financial needs, a person does not have to live to finish a life insurance plan. In fact, an untimely death creates a very large estate in exchange for a relatively small investment. Even if the breadwinner pays only one premium, the plan is completed the moment the insured dies, substituting new cash for the earned income that the decedent would otherwise have provided.

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