A few years ago I went back to college and am now a Certified Financial Planner. For a while I was the oldest CFP in the country. Perhaps I still am as I don’t think I have got any younger!
A few months ago I was at a meeting of CFP’s from around the country and what really surprised me was that a few of the CFP’s at the meeting did not see the need to highlight the need for Life Insurance when they were doing financial planning for their customers.
I found that extraordinary!
In their financial plans they did cash budgets, retirement planning, estate planning, college education for children but no mention or advice on the one vital ingredient; the bedrock of all financial planning, the creation of money through the magic of life insurance should their customers not get the time to complete their financial dreams.
Over the years I have paid out many life insurance claims and nobody, not even once has said to me that they didn’t need the money. Nobody ever said to me that it wasn’t important. In most cases it was the vital money that was going to enable the family to hold their heads up with financial dignity. In many cases it was the only money they had.
We live in a very sophisticated financial world with some really ingenious financial products and yet there has never been any other financial product designed that creates new money at exactly the precise moment in time that it is needed.
Let me explain what I mean.
In this example it could be the man or the women or both who are earning the salaries to pay the household bills it doesn’t matter who it is, so long as the money earner is covered. In this example it is the man at work and his wife is taking a break from her job and has decided to work in the home until their small children are a little older.
If he dies suddenly in a car crash and doesn’t have proper life insurance cover, yes of course she could go back to work and employ a child minder, but maybe as her children have lost their dad she would prefer the choice of remaining at home with them to comfort them through what will be a very difficult time.
Lets say that when we were working with this couple in helping them with their financial planning that we had highlighted the importance of Life Insurance and had recommended that to protect his after tax income of say €30,000 a year he would need close to €600,000 of cover and they had agreed and we had been able to get the cover. Now it is a much more positive situation.
At the exact moment the man died there would be €600,000 sitting in waiting for his widow and family in whatever insurance company the cover was arranged with. It is magic as this is new money that was never there before is now available. Yes it was paid for but perhaps only a small fraction of what is about to be paid out.
If his widow had taken the policy out on his life or if it was a joint life policy all that is needed is the death certificate and the cheque will be delivered by you to her and you will feel so good because you will have provided the family with the money to go on living because the husband just didn’t get the time to finish the job himself.
Let us never underestimated the importance of protection in case of death or illness as it is the very foundation of what we do.
I am doing a financial plan for a young professional sportsman at the moment. He is only 18 and has no need for life insurance cover right now. He has no dependants no borrowings. But yet I will be recommending some life insurance cover.
Perhaps you wonder why.
Let’s roll on the years a little say 10 years from now when he will be 28. Perhaps then he will be settling down and perhaps buying a house, getting married and having children. Yes he will need some life insurance cover then but as he is involved in a dangerous sport he might have picked up some injuries along the way or perhaps he might have suffered from an illness that prevents him from getting life cover at that time.
Today he can buy the cover at a big discount to what it will cost him in 10 years and today he is at his healthiest and youngest and we should be able to arrange the cover for him. In 10 years time we cannot be certain.
Buy a little today when you can get it at a discount to what it will cost later!
Ted Dwyer Family Business