The other day I was having a conversation with a friend, and he asked if one would ever need two life insurance policies. I answered him, as I often answer most questions related to finances, it depends. I’m going to address two issues that this question raises. The first, is my insight into why I often reply, “It depends” when asked about a financial question. I’ll also address some of the factors that might encourage one to look at purchasing multiple life insurance policies and how this simple question can become much more complex very quickly.
To the first point, the “it depends” response is based on the fact that the financial needs and resources of each person, family and business are different. Financial planning isn’t designed to be a series of fill-in-the-blank questions that provide you with a generic answer. Financial planning is designed to be a dynamic and engaging process where the client and advisor are able to have an ongoing dialogue to discuss each client’s unique circumstances, feelings, cash flow and goals in order to create personalized recommendations that make sense for the client. The plan may even need to be adjusted as circumstances in your life change, and the dialogue is important to help your plan be adjusted as necessary. You certainly wouldn’t want your physician to prescribe you medication or treatment based on a limited conversation, so why would you want to seek financial advice based on a limited conversation and limited set of information?
A simple answer never gives you the fair thought, consideration and response your question needs and you deserve. In other words, by just generically answering your question, I’m probably not providing any meaningful advice or information to you.
For the initial question that was asked, “Would one ever need multiple life insurance policies?”, the answer is certainly and many people carry multiple life insurance policies. The reasons that drive this need for multiple life insurance policies is related to the circumstances of each individual’s life, financial situation and personal desires. One of the issues that factor into the search for additional life insurance stems from the level of insurance you currently have and if it will provide the level of support you desire.
You may currently only have life insurance that is offered through your employer, and it isn’t enough to provide the level of support you would like. For example, you already have an existing life insurance policy, but it won’t provide the level of coverage you’d like now that you’ve started a family. Or, you have a term life insurance policy that you realize may need to be continued, and you’re not sure if you could qualify for competitive rates when you’re in your 50’s or 60’s. These are just a few of the questions that go into the process of reviewing life insurance needs, and there are certainly many other questions and issues you’ll need to consider when thinking about life insurance coverage. I haven’t even touched on which type of insurance policy you may want and the variations between them. As you can see, this simple question has turned into something much more in depth than a simple yes or no answer.
Vaughan-Brown Wealth Management, LLC is set up as a fee-only financial planning firm. This means that we do not receive any type of commission based on our recommendations or for the implementation of the recommendations and suggestions we provide you. Part of our financial planning process is to work with you through a life insurance needs analysis and help you determine the pros and cons of the coverage you have in place. We discuss the current level of coverage and if it may make sense to pursue additional coverage, replace coverage and even if you want to consider canceling some coverage. Since we don’t receive a commission on the recommendations we provide you, you’re able to have a higher level of comfort knowing that your best interest is driving this discussion and not a sales agenda.
Interested in learning more about the financial planning process? Contact my office and set up an introductory meeting. You can reach me at 919.695.3007 or by email at firstname.lastname@example.org