Archive for October 22nd, 2009
I just got an email a few minutes ago. A client died in a car accident two weeks ago and I helped his widow complete the claim forms and make sure she really didn’t have to deal with the process.
Today’s email from MONY Life simply said:
This is to inform you that we have received the requirements from the beneficiary.
We are happy to advise that the claim was approved for payment today and the check is being sent direct to the beneficiary.
Check amount: $250,239.41
Bottom line. This isn’t about me and it really isn’t even about the man who took out the life insurance. It’s about his widow and the fact that there is at least one thing she won’t have to worry about.
October 22nd, 2009
I certainly don’t want to be seen as jumping on the pro excessive pay band wagon for executives, CEO’s and Presidents of companies, but there are some company financial health issues that can and should be addressed in the life insurance arena.
It happens daily in America. Whether it is a small partnership or a large company with a multitude of shareholders, an untimely death can send a company into a tailspin and into a place where, with proper planning, they didn’t have to go.
If the President of a company or a major shareholder of stock passes away, a company needs to be poised to be able to buy back that stock. Buying the stock back ensures that the company will keep remain stable. Failure to buy the stock back can leave wide openings for power struggles, or if enough shares of stock are at risk, a company takeover.
With life insurance and a stock repurchase plan in place, there is no question as to any loss of control of the company. The company absorbs those outstanding shares and the family of the deceased is paid a fair market value for the stock.
This can be even more critical in a small partnership where most state’s laws would allow a surviving spouse or member of the family to actually move in and become part of the business if they weren’t bought out. If a proper buy/sell arrangement is in place, fully funded by life insurance, the surviving partner has the ability to buy out the deceased partner’s share of the business.
Life insurance is an attractive way to enhance a bonus package for members of a company board of directors. Generally this is an unpaid position where the person or their survivor might get some amount of stock for their years of service. In a best case scenario if the company were to carry life insurance on the board member they could use the proceeds from that to buy the shares of stock back from the surviving spouse.
Bottom line. The death of the wrong person at the wrong time in a company can create a real crisis. A funded life insurance plan can be the salvation of the company and the family of the person who passed away.
October 22nd, 2009
Forgive the title to this post, but thank God we have women in this country who will do what is needed to keep family’s finances intact. I read an article today that referred to the current recession as a “mancession” due to the fact that more men than women have lost their jobs.
It’s not a small disparity either. Apparently the jobless rate for men is 9.6% while for women it is 7%. What that means is that the balance has shifted and it is women who are carrying the burden of family income more now than ever in the past.
So, for all you men….and women, who have in the past thought it was the prudent and reasonable thing to protect that breadwinner’s income with life insurance forsaking the other spouse as inconsequential in the whole financial scheme, hold your horses! Have the roles changed?
First of all, that was the wrong attitude before the mancession and surely now the logic of both adults in the household having adequate life insurance should be starting to sink in. Certainly the financial impact of a lost breadwinner can put the fear into a family, but so to can the financial impact of a lost homemaker. Do you think for a minute that you can replace what a stay at home mom (or dad) does for free?
I guess where I’m headed with all of this is that if this recession gets us all to take a look at the value of life insurance as more than just cash income replacement, well, we can attach a little value to the whole experience.
Bottom line. Actually my hope is that the life insurance lesson is just one of many that we as Americans take to heart from this whole economic meltdown. Personally I think we are better, far better, than we have been acting for the last 30 years.
October 22nd, 2009
Back in the day….In a much simpler time there used to be a stock answer to how much life insurance a person should carry. There was no real need for a drawn out needs analysis. Life was simple.
How much life insurance do I need? Well, ten times your annual income. The logic was that if you passed away your beneficiary could put that money away in an investment vehicle that allowed for withdrawals “that would produce at least 10% annual return”, so your beneficiary could literally live off the interest leaving the principal intact for emergencies or to pass on as a legacy to their beneficiaries.
Then came 2008 and that assumption somehow no longer seemed to make sense since your investments were losing money, not gaining at least 10%.
One of the problems for many people is that companies have “financial underwriting” guidelines that restrict how much insurance they will be a party to on an individual, based on a multiple of income. Those tables haven’t changed since the 80’s when interest rates were well into the teens and a person could certainly justify no more than 10 times their income as adequate replacement.
Just yesterday Prudential took the lead in addressing the fact that the old guidelines don’t adequately reflect today’s incomes and today’s economy. They were the first to say out loud that people have the same insurance issues they did three years ago in a healthy economy, but they have less income.
Bottom line. These new guidelines will allow us to provide insurance that more accurately reflects the insured’s needs without being restricted as much by the income/insurance ratio.
October 22nd, 2009
