Let’s talk about band-aids. Yes, it’s not the first term that pops into your mind when thinking about the latest in financial news however a recent experience reminded me that sometimes financial lessons can be learned in everyday life. Finance gets a bad rap for being something shrouded in mystery and acronyms though hopefully this post and others can shed a little light on what it means to prepare for your future.
I cut my finger the other day, not so badly that I needed stitches but one that needed to be cleaned and bandaged properly. I soon discovered that I was out of “Band-Aids” and I promptly went to the CVS to buy some. With my finger wrapped in a paper towel I loaded up on all sorts of “Band-Aids”; waterproof, extra long, the type that come with antibiotic ointment. Not only was I set for the week or any other time I will ever need a band aid, but my family was set as well. It occurred to me that “Band-Aids” are things that you buy before you need them so you will have them in the case of emergency. That is a lot like life insurance. As a Wealth Management firm and Registered Investment Advisor it is interesting to speak with our clients about “Capital Preservation Growth Strategies” or the most innovative approaches to freeze the taxes and leverage your generational wealth, but it is not always interesting or glamorous to speak with our clients about reviewing their insurance.
What it all means
Although you may not expect so, life insurance as an asset class can have some very innovative applications for generation skipping leverage, but how about the simple “Band-Aid” approach of a large inexpensive term insurance policy. An extra five, ten, or twenty million dollars, income and estate tax free, delivered to the people you love in the event you were to die can provide financial confidence.
I was working with a client last year discussing the fiscal cliff, the potential closing of the $5M estate exemption, and all the complex strategies of installment sales, defective trusts, and family LLC’s. The challenge was that he was too busy to invest the time to fully explore and commit to a permanent strategy so he asked, can’t we just go with a “Band-Aid” approach? Term insurance is so cheap; can’t I just buy a bunch of it to put a Band-Aid on this problem until I can really solve it? This is exactly what we did, and one year later he was very happy that he bought the “Band-Aids” before he needed them.
When is the last time you considered your life insurance? Do you have enough to provide financial confidence? Do you have any term policies that you bought years ago that are about to expire or jump up in premium? The time to ask the question is now, when you don’t need it, and are able to get it.
Where M3 stands
The team at M3 Wealth Advisor will be happy to evaluate and advise you on your insurance needs from the innovative and complex to the “Band-Aid” solution, so give us a call and start the dialogue. Hopefully you wont need life insurance any time soon, but if you do you’ll be glad you have it.