Using Life Insurance To Jump-Start Your Financial Future (Part Two)
By: Dr. Peter Ikre
The August edition marked the commencement of a series of articles on financial planning tailored toward furthering the empowerment and emancipation of immigrant communities particularly those of African origin from the menace of financial subjugation. In case you missed the previous publication, I highlighted the need for individuals and families to develop a mind-set aimed at establishing financial order or security for themselves and in the lives of loved ones from a short and long term perspective. According to Morris and Morris (2004), financial planning is for everyone irrespective of whether you’re new to the workforce or about to retire from your employment. It is neither too early nor too late to begin the process as it provides a perfect avenue for assessing one’s progress, revision of financial goals, and updating one’s strategies. The void created by non-existence of a financial plan may result in financial risks in the form of: a) insufficient reserves to meet expenses such as funding college education for your kids or making a down payment on a home, b) delaying retirement due to inadequate funds to finance the golden years, c) leaving behind no financial legacy in case of sudden death. I want to use this occasion to appeal to my brothers and sisters especially those in the African communities to ponder seriously on this issue. Sometimes, in my practice, I see people exhibit flair of invincibility or immortality with respect to financial planning. Obviously, such an attitude is grossly misplaced and self-defeating. Nobody lives forever, and we really don’t know when our time is up. Assuming we love ourselves, one expects that same love to be extended to our spouses and children by putting in place a sound financial plan for them. Recently, a couple of deaths were brought to my notice. One involved the death of a 32-year old male from cancer and the other a lady in her mid-thirties from cancer as well. What lessons can one draw from both cases? Unfortunately, financial planning is time-sensitive as death can come knocking on the door at any given time notwithstanding one’s age, gender, or status. At this point, it’s pertinent to emphasize a common practice in the African community involving wake-keeping ceremonies. Among other things, they provide an avenue to raise money for families of bereaved persons. It is a laudable gesture as it
represents an important aspect of the culture. However, one must admit
that the funds raised on these occasions are infinitesimal or nothing compared to the burgeoning needs of the families concerned. The existence of a life insurance policy provides a much-more soothing experience in the lives of family members forced to undergo such an agonizing event.
Once again, financial planning begins with protecting yourself (if single) and family (with spouse and children) against known and unknown risks to life, property, and assets. The assumption here is that most people have medical insurance. If that’s the case, the next thing to do is to obtain life insurance for yourself and the family. For those lacking health insurance, please make yourself available for the upcoming 3rd Open Enrollment Period of the Affordable Care Act or Obamacare beginning October 15, 2015 to February 15, 2016. If you need assistance in this regard, please contact me at the address or telephone number at the bottom of the article. Remember that procurement of a life insurance policy remains an indispensable tool to help you attain some of your financial goals in life. Some of the good things it provides include: a) paying the bills when the income of the breadwinner is no longer available, b) offsetting funeral, medical, and legal expenses following one’s death, c) preservation of family wealth or lifestyle, d) sustaining family and business legacy, e) eliminating debts, and f) building cash value from where one can borrow tax-free to make down payments for a home or pay for tuition.
In the August publication on the same subject, I promised to revisit and elaborate on the types of life insurance. To recap, there are essentially two types of life insurance: a) temporary and b) permanent. As the names indicate, temporary policies are for a given timeframe such as one, five, ten, or more years, whereas the permanent ones end with the death of the insured individual providing coverage throughout his/her entire life. Both forms of life insurance have sub-types such as annual renewable term and converting term for the temporary format and the universal life/whole life configurations in the case of the permanent feature. One important distinction between the temporary and permanent types is that the former does not build the kind of cash reserve seen in the latter. This characteristic makes the permanent form costlier than the temporary one. In any event, it is important to apply for one most likely to help you reach your financial objective.
The writer may be contacted at
Investigroup, Inc. 1282 liberty Avenue, Hillside, NJ. 07205
Morris, K. M., & Morris, V. B. (2004). The Wall Street Journal guide to understanding personal finance (4th ed.). New York: Lightbulb Press, Inc.