Improving lives through sound financial planning.
Our video series on personal finance, From the Orange Couch, is back with Robert W. Tull, Jr., President & CEO of Tull Financial Group answering several commonly asked questions about life insurance.
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Continue watching for simple strategies on how to protect the finances of older adults who may be contending with cognitive or capacity issues. Thanks for watching!
Good afternoon! I’m Ashley Albertson, your Client Services Manager at Tull Financial Group and the host of our video series called From the Orange Couch, where we take questions from you all and aim to educate the masses. Today, joining me is Robert Tull, CEO and Founder of Tull Financial Group, with more than 35 years of experience as a Certified Financial Planner™ professional. Today, I wanted to talk about life insurance.
Ashley: So, I wanted to paint the picture. During COVID-19, life insurance sales surged due to the pandemic, with everyone being very concerned. Should I have been concerned? What is life insurance?
Robin: When we talk about COVID-19, people should have been thinking about life insurance prior to that. It’s part of the financial planning process. You look at your investments and then your risk management, which includes life insurance and health insurance. All of those components fit into your financial plan. Life insurance is like an umbrella: it provides protection for those financially dependent on you.
Ashley: Right. As a wife and mother, it sounds like it would be beneficial. But how much?
Robin: You first need to identify who is dependent on you. A common rule of thumb is to multiply your income by ten. For example, if you make $50,000 a year, you’d want coverage for $500,000. Additionally, consider other expenses like childcare or private education for your children. Once you determine the amount, that generally will eliminate the permanent policy.
Ashley: So what are the differences between term and whole life?
Robin: Term insurance is for a period of time – 10, 15, 20 years. At the end of those 20 years, the policy is done. Think of it like car or home insurance: if you never have an accident, it never pays out. You still have it to protect you. Whole life insurance combines insurance with a savings account. It’s generally less expensive to keep them separate, with term insurance and maxing out pretax retirement accounts being a preferable strategy.
Ashley: Some retirees still keep their life insurance even after their children are grown. Why?
Robin: For the majority of people, term insurance usually suffices, but there are exceptions. For instance, if there are estate tax issues or a need for a spouse’s financial transition after death. Key man insurance for businesses is another reason.
Ashley: Okay. Well, it sounds like I have some homework. Where should I go to pick a policy?
Robin: Insurance is sold, not just purchased. Consult reputable insurance professionals to compare prices and company ratings before making a final decision.
Thank you, Robin, for the valuable information. Our next Orange Couch segment will focus on college planning. If you have any questions or other topics you’d like us to cover, please leave comments or reach out to us. We’re here to help!
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