Everything has advantages and disadvantages. Living on the North Carolina coast, we enjoy the beautiful beaches and mild climate. The region is, however, part of what is known as “Hurricane Alley”. Everyone from surfers to government officials attentively watch the weather updates to see when and where a hurricane will touch land. We buy all the bread, milk and water that can be found and “Batten down the Hatches” to make sure that we are ready for whatever the storm may throw at us.
Financial Planning can be like preparing for a storm. Over the years many of my clients have purchased life insurance to protect their family, business or to pay estate taxes. Many circumstances have changed. The estate tax credit has been increased and some clients have sold their business thus reducing or eliminating the need for coverage. Then others have created enough wealth to provide for their families while other scenarios are present where some simply cannot afford the coverage any longer. This has caused many people to just cash their policies in or to simply throw the policy in the trash. That is like “Cash in a Hurricane”.
Now, I know you would not go outside in a hurricane and just throw your cash in the air. That would make no sense. However, if you cash in your life insurance policy or just stop paying the premiums for your term life, whole life or universal life policy you potentially did just that. What you should do is have a formal evaluation of your circumstances to determine the many options you may have.
One option to consider is to sell your policy. Here is how it works. You have that $1,000,000 term policy that you purchased 20 years ago to cover your mortgage or debt. Now you have come to the end of the road and the premiums will be increasing by an enormous amount. Your order an appraisal of the value of the policy. This is not much different than with real estate. In fact life insurance unlike other insurance is property. The value of the policy could come back worth hundreds of thousands dollars in excess of its current cash value or it could be zero depending on the quality of the policy and your life expectancy. Not doing a thorough review of your situation is just like “Cash in a Hurricane”.
Now if someone is willing to purchase your policy that means it is of value and could be of value to you. However, if the premiums are cumbersome and your situation has changed, then reviewing a potential sale of your policy could have merit. Remember, don’t get caught by surprise by a storm; batten down the hatches of your financial planning so you are prepared for whatever storm comes your way.
Scott A. Winslow, ChFC
Scott A. Winslow, ChFC is a managing partner at Nabell Winslow Investments a regional investment advisory firm. He can be reached at [email protected]
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