E49: Protecting Your Family’s Financial Future Through Creative Life Insurance Strategies

Keep your legacy intact with the right life insurance strategy. Most people think of life insurance as simply coverage, but did you know it can help pass on a multi-million dollar inheritance intact?

In this episode of Wealth Well Done, Eric Scovill provides practical advice on using different types of life insurance to protect your family's financial future. Eric discusses long-term care options, the pros and cons of term vs. permanent policies, and how to determine the right death benefit amount. Eric also shares how to avoid estate taxes through an irrevocable life insurance trust. 

Whether you're just starting out or have significant assets, learn tactical tips to effectively use life insurance in your financial and estate planning.

Here are some topics from today’s discussion:

• Long-term care insurance options explained
• Differences between term, universal, and whole life policies
• How to determine the right death benefit amount
• Avoiding estate taxes with an irrevocable life insurance trust
• Creative strategies for high net worth individuals

Episode Highlights:

[03:26] Long-Term Care Coverage

Eric notes that older policies from when the coverage first launched had advantages like fixed premiums that are no longer seen in today's marketplace. He warns that new standalone long-term care policies typically allow for rising premiums without guaranteeing coverage amounts. However, Eric advises connecting long-term care insurance to a life insurance policy provides more stability, as it fixes the premiums while tying it to a death benefit. 

[13:00] How to Determine the Right Death Benefit

When determining the appropriate life insurance death benefit amount, Eric stresses considering outstanding debts, foreseeable large expenses like funding children's college educations, and replacing the income that would be lost upon the insured's death, as this is typically much higher than most clients initially estimate and often leads to a significantly higher coverage level than first proposed. 

[15:57] Other Types of Insurance Policies

• Universal life insurance: Offers a fixed death benefit that stays the same. Premiums are generally lower than whole life. Cash value can be accessed but may affect the death benefit. Meant to last a lifetime.
• Whole life insurance: Allows the death benefit to increase over time. Offers more flexible access to cash value through policy loans. However, premiums are higher than universal life. Can be oversold as a retirement income source.
• Survivor life insurance: Insures two individuals (e.g. husband and wife) under one policy. Reduces risk for the insurance company, lowering premium costs compared to individual policies.
• Irrevocable life insurance trust: Allows transferring life insurance contracts to a trust to avoid estate taxes by moving policies outside of an estate. Can help pass on policies and cash value to beneficiaries tax-free.