Designing A Life Insurance Portfolio

Life insurance is a flexible, financial tool that can help you protect your assets and reduce your risk. While many people think of life insurance solely for the death benefit, a life insurance policy can be used to achieve any number of financial goals, including saving for college and retirement planning. Life insurance is particularly useful as an estate planning tool to provide for your family and your business when you're gone.

The first step, of course, is to choose an independent insurance advisor you trust. Referrals from family and friends are a good starting point. Talk to several advisors to get a sense of their background and if they'd be a good fit for you based on experience, goals and personality. When talking to them, ask if the insurance agent represents one company or several companies.

You might also ask how they are compensated for their services. Most operate on a commission basis. How they are paid is not necessarily a deal breaker, but it might influence your decision and the number of options you have.

Once you've chosen an advisor, set aside time to review your overall financial picture to see what type of insurance is right for you. You may want more than one type of insurance to reduce your risk and plan for your future. You and your insurance advisor will design an insurance portfolio, based on your needs.

Follow these steps to ensure that you and your advisor agree on your strategy:

- Outline your insurance strategy in writing. This makes it easy to refer to later by you, your advisor, your family or your business partners.

- Develop a portfolio of diversified insurance policies that will provide short-term and long-term protection at acceptable levels of risk. For example, while your children are young and still living at home, you may have a need for a large death benefit. A term life policy with a high face value might suit your needs for the short-term (e.g., 10 years) while a whole life insurance policy can build cash value and serve as an investment tool as well as providing a death benefit in the future.

- Delineate risk protection in the insurance portfolio.

- Recommend an allocation strategy for insurance policies.

- Create guidelines for the selection of insurance companies and diversification of insurance assets.

- Identify evaluation criteria for assessing the insurance portfolio's performance.

- Promote continuous and effective communication between the advisor and the client.

By creating a diversified life insurance portfolio with a trusted advisor, you can protect your assets now and long into the future.

A diversified life insurance portfolio should be a part of every business owner's long-term financial plan and exit strategy. For more on this topic, check out author Joseph M. Maas' book "Exit Insight: Getting to Sold!" available at Merrell Publishing or Amazon.

This article was published on 18 Sep 2014 and has been viewed 784 times
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