Financial Fitness

Making Sense of Life Insurance with Todd Micciche

Todd Micciche photo

Life Insurance is one of the most important financial protections to have, yet is often among the most challenging financial areas to figure out.

Using the information I’ve learned over the years, I hope to share this knowledge with you to help you make the wisest decision for you and your loved ones at this point in time.

Here Are a Few Common Life Insurance Questions I Often Hear:

  • “Do I need life insurance?”
  • “How much do I need?”
  • “What type of policy should I get?”

As with any aspect of personal finance, the true answer depends on the individual. However, there are some good life insurance guidelines to follow to help you make the right decision for your specific situation.

 

Do I need life insurance?

Yes! Life insurance is one of the foundations of any good financial plan. Of course, even the best laid financial plans can be derailed by an untimely tragic event. In those difficult times, life insurance can help cover unexpected expenses, medical bills, unpaid mortgage balances, and more. Generally, life insurance provides valuable monetary relief for loved ones during these times. Some form of life insurance is critical, especially for people with young family members.

 

How much life insurance do I need?

This question can be trickier. There are several reasonable ways to come up with a figure, but I will cover two of the most common guidelines: basing the coverage off of some multiple of the individual’s annual income, or basing it off the total value of certain liabilities or future goals. While the best way to arrive at a figure is to sit with an advisor and take a critical look at your specific situation, here are some ways to start thinking about what might work best for you:

  • Income replacement: The old rule of thumb says to buy coverage based on 10 times the insured’s annual income. So someone with a $50,000 annual income would take out a $500,000 policy to stay covered.
  • Cover debts and liabilities: This can cover some obvious considerations, like the mortgage or other consumer loans. But it can also be useful in covering costs that are more emotionally challenging to consider, like funeral costs or settling an estate.
  • Future obligations and goals: Wanting to provide for a child’s college education or a spouse’s retirement are costly propositions for even the most diligent savers. If the loss will affect the savings plan of a loved one, life insurance can help keep those plans on track.
  • Child care: This is especially important for stay-at-home parents. The value they provide in raising children in a loving home cannot be measured, but child care expenses add up. When deciding coverage, don’t forget to consider child care and other aspects of raising a family.

 

What type of policy should I get?

Generally speaking the choice comes down to “term insurance” versus “permanent insurance.” Term life insurance is far less expensive, and provides a specific time frame (“term”) of coverage – terms are usually 30 years or fewer. Permanent life insurance costs considerably more, but it guarantees that beneficiaries will receive a payout whenever the insured passes. In many cases permanent life insurance also gives the option to build cash value (similar to a 401k or IRA) which may provide high-income earners another tax-deferred way to save money. If you’re uncertain, a common middle-of-the-road strategy is to “buy term and invest the difference.” This involves buying a term policy and investing the savings (as compared to a permanent policy) into mutual funds or other investments to earn higher returns and build assets. This can offer a way to gain coverage for a known time period, while also making your money work for you through investments.

Life insurance can feel complicated and can definitely be scary to think about. But courageously moving through a little discomfort now can be better than thinking about what could happen if you’re no longer able to provide for loved ones. By examining your needs and matching them with the available options, you can make a smart decision and put yourself and your family in the best position to grow and succeed long-term. With all of the strategies and products available, it can feel daunting. But if you want to talk it out with an advisor dedicated to supporting your needs, we’re here to help see which direction makes the most sense for you.

Did you know that as a Unitus member you have exclusive access to the advisors at MEMBERS Financial Services? Consultations are always at no-cost and no-obligation. To start the dialogue, call or email Shelly Geweke today – 503.423.8519 / shelly.geweke@cunamutual.com.

What financial topics would you like to learn more about? Email Shelly and let us know! Your question might be featured in an upcoming Connections Newsletter!

 

Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

 


About the Author: Todd Micciche, a financial advisor like his father before him, is driven by the positive change he has seen in the lives of his clients. He earned his MBA at Portland State University and has built 12 years of experience advising clients to help them reach their specific financial goals. He holds various FINRA securities registrations and is currently studying to attain CFP® certification.

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