Life Insurance for Physicians and Dentists
Term Insurance Vs. Whole Life/Permanent Insurance
Life Insurance provides coverage for many of life's events and different life insurance products exist that are better suited for each event.
Although certain advisors have strong opinions on which type of life insurance is best for their clients, the fact is that variations in life insurance products exist because there is more than one need, and everyone's situation is different.
Physicians and Dentists have unique needs based on their lifestyles, risk exposure, and standards of living that make the benefits of certain life products more valuable than others.
Start with the customer – find out what they want and give it to them.
LIFE EVENTS WORTH PROTECTING
TRANSFER OF WEALTH
Term Life Insurance
Term Insurance is the least expensive way to purchase a large Death Benefit for a certain period of time, normally purchased during your income-earning years. When Physicians and Dentists complete an accurate Life Insurance Needs calculator they will often find that their Death Benefit needs call for millions of dollars of Life Insurance.
We often recommend for simple calculation that you add up all your debt (mortgage, credit cards, loans, cars, etc.) and start there. Then add $250,000 to that number for each child's education costs. Lastly, decide how much income you would want to replace on a monthly basis if your debts and education expenses were eliminated. This would include the cost of living expenses (property taxes, food, clothes, day to day living expenses, etc). So if you want to provide $8,000 per month for living expenses then you would add 2 million dollars to your life insurance benefit needs. Every million dollars of Death Benefit will replace about $50,000 per year of income.
As an example, if you are a physician or dentist with a total debt of 700,000 with 3 kids and you want to provide $8,000 a month for living expenses then you would need a Death Benefit of $3,450,000.
Term Insurance can easily cover your Life Insurance needs that are associated with replacing your income so your spouse and children can continue on in the lifestyle you envision for them whether you are here or up there looking down. An unexpected death should never cause financial strain on the loved ones you leave behind.
Term insurance is relatively inexpensive and provides for tremendous peace of mind. Term Insurance can be purchased over a 10 year period, 15 year period, 20 year period or 30 year period. The period you pick should be based on how many years you feel that you will be responsible for debts, education, and living expenses.
Life events protected through Term Insurance
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Whole Life/Permanent Life Insurance
Whole Life/Permanent Life insurance provides protection designed to last the rest of our lives. These policies are structured to be there when we die even if we die at or past life expectancy.
Unlike term insurance, Permanent Life Insurance policies require a higher commitment to premium dollars. But with Permanent Life Insurance you own your policy instead of renting it. We like to think of it as the difference between renting your home and owning your home. Renting accomplishes the need of having a place to live while you build up assets to eventually purchase your home. Owning a home includes a larger payment commitment along with expenses like maintenance and taxes. Most people would agree, that there are tremendous advantages that come with owning a home which makes the added cost worthwhile.
Owning a Whole Life Insurance policy is not much different. You have the mortgage value of your home, this would be your Death Benefit. Let's call it $500,000. You have the monthly Principal and escrow payment, this would be your monthly premium. Let's call it $2,500. With your home, every time you make a payment the equity in your home increases, in your Whole Life policy this would be your Cash Value. With a Whole Life Insurance policy, the insurance carrier provides you a guaranteed interest rate, normally 4.5% and a non-guaranteed dividend. Like with your home, once you've built up some equity you can take out a Home Equity Line of Credit, this would be a Cash Value Loan.
A lot has changed over the years, but it was once thought that your home was your greatest financial asset. We know this to be somewhat untrue but nonetheless our homes will become a big asset as we grow older in our house. And the same is true with Whole Life Insurance. Some of the major advantages of Whole Life Insurance include the ability to recoup your investment Income Tax-Free and provide a Tax-Free Death Benefit to your beneficiaries.
Whole Life Insurance is most commonly thought of when describing permanent life insurance, but the fact is that Whole Life Insurance is just a product and there are numerous Permanent life insurance products available that fit the needs of the client differently and Whole Life Insurance is just one of those products. As client needs have changed the insurance carriers have adapted by introducing additional Permanent Life Insurance products that offer premium flexibility, market exposure for cash value accounts, and the ability to access large amounts of Tax-Free income during retirement years to protect against the insecurity that comes with outliving your retirement.
Life events protected through Whole Life/Permanent Insurance
TRANSFER OF WEALTH
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There are many ways to purchase life insurance and many ways to protect your life events. Nobody should advise you that one way is right for everyone, we see this a lot from some very respected advisors in the industry.
We recommend you look past the opinions of others and research the plus/minus of each available life insurance product for yourself and decide where you, your family, and your business needs fit.
Life Insurance companies have been at it for centuries and their products if purchased properly offer fail-safe solutions for all of life's events. Always remember, that, Life Insurance is the oldest financial institution in our country, they pre-date the banks and the stock market, so their products and benefits have stood the test of time and have proven throughout the centuries to be the safest way to protect your legacy.