Podcast: 8 Questions to Consider Before Buying Life Insurance – A Needs Analysis

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May 2, is Life Insurance Day, and marks the anniversary of the first day that life insurance became available in the United States. The observance also brings awareness of the benefits of life insurance. So…

Join Wealth Advisor, Alex Helms, as he discusses the eight important questions you should consider before purchasing life insurance to help ensure you and your family have the proper amount of coverage. Mueller Financial Services can help you determine the adequate amount of coverage you need by performing what is known as an insurance needs analysis.

For more information, please contact:

Alex Helms
Wealth Advisor
ahelms@muellersolutions.com
630.524.5260

Episode Transcript:

[00:00:05] Emily: Hi everyone. You are listening to Managing Your Wealth, Your Vision, Our Guidance, the Mueller Financial Services Inc. podcast. I’m Emily, and today I’m with Wealth Advisor Alex Helms, who’ll be taking us through an insurance needs analysis, why it’s important, and the various questions asked to help determine the right amount of coverage a person or a family might need.

[00:00:28] Emily: The reason we’re talking about it now is because Tuesday, May 2nd is Life Insurance Day, and if you’re listening to the podcast on the day this episode is launched, then that day is today. So great timing to be discussing this topic. But before we get into the topic, let’s do an introduction of our guest speaker.

[00:00:48] Emily: Alex joined Mueller Financial Services as a Wealth Advisor in early 2021. With over six years of experience in the mortgage, banking, financial services, and wealth management industries, Alex is able to help clients navigate all stages of their financial journey, including insurance.

[00:01:05] Emily: Alex, thanks so much for coming on the podcast today.

[00:01:08] Alex: Thank you. Great to be here. Excited to speak to everyone today on, uh, life insurance.

[00:01:12] Emily: Great. Let’s get into the questions. What is a life insurance needs analysis and why do I need one or anyone for that matter?

[00:01:20] Alex: Yeah. Thank you and and great point. So what a life insurances needs analysis is, is this is an in-depth analysis that helps clients understand the why behind the amount of insurance that is being presented to them. Instead of a general number that may be over insuring clients, we fall back on our financial planning tools to analyze the true need that a client has for insurance.

[00:01:40] Emily: And what types of needs are you analyzing exactly?

[00:01:43] Alex: We’re analyzing various things and asking various questions to help uncover our client’s true needs. There’s various questions when it comes to identifying these needs for each client. One of the first questions that we often like to ask is what current insurance coverage does the client currently have?

[00:02:00] Alex: This is an important question to first understand that clients have first a knowledge of insurance and understand their knowledge of basic insurance. Again, this is always supposed to be an educational aspect for these clients, so we want to make sure that not only are we providing the right products for them, but also to make sure that our clients are educated.

[00:02:17] Alex: There are many different types of insurance as well as various products that do offer both insurance and other tools. Some of these can be through your employer or other financial professionals.

[00:02:28] Emily: Yeah, and I’ve heard somewhere before, maybe it was from an advisor at Mueller Financial Services, uh, or from somewhere else, but just your employer’s life insurance coverage, while it’s a really great benefit, is probably not enough coverage in the event that you or your spouse, unfortunately passes.

[00:02:47] Alex: Yeah. Again, not to be morbid throughout any of this conversation today, but we are planning for some of the unknown. Right? Um, you know, what would happen to us if our spouse passed? A lot of the times we’re gonna be asking these hard questions to clients, things that they don’t think about. Um, but you hit it on the head, Emily.

[00:03:02] Alex: A lot of the times, although clients may be covered by their employer, a lot of the times that coverage isn’t necessarily an adequate amount. And also something that we do have to keep in mind is that this coverage through your employer is only while you’re working. Again, let’s say something happened to you where you happen to lose your job, and then again, something catastrophic happened on top of that.

[00:03:22] Alex: Unfortunately, that employer coverage wouldn’t necessarily be there. Um, that’s why it’s important that we make sure that we get the holistic plan, including any current insurance employer sponsored plans, as well as any outside plans that clients have for insurance.

[00:03:37] Alex: Secondly, we then take our clients through a cash flow analysis. Basically what’s coming in and what’s going on every month, and what can the client afford. We have a wide variety of data gathering tools that we use with clients to help them first understand their family’s cash flow.

[00:03:50] Emily: One of them being MoneyGuide Pro, correct?

[00:03:53] Alex: Yeah. So MoneyGuide Pro is one of our planning software systems that we use with all of our clients here at Mueller Financial Services.

[00:03:59] Alex: As part of Money Guide Pro, insurance analysis and a needs analysis is part of that holistic plan. So as part of our financial planning with all of our clients, we are sure that we always cover insurance as part of that planning process.

[00:04:13] Alex: What the cashflow analysis allows us to do, it provides an idea of what, what are the fixed expenses for the clients? What are the needs and what expenses are wants? Maybe some clients are spending on things that they may be a little bit overzealous, but more importantly, it allows us to see what would potentially be leftover cashflow wise for these clients on a monthly and both annual basis.

[00:04:32] Alex: Again, keep in mind we’re never trying to stretch a client thin or limit their spending or tell them how to spend their money. We’re more so trying to fund that comfortable number where we can meet in the middle, where the client is comfortably uncomfortable, right? Maybe not spending too much, but hey, maybe we need to stop spending eating out every week again, making sure that all of the client’s important needs are identified, um, while still being able to protect their families

[00:04:57] Alex: Additionally, I think going through this process of the cashflow analysis really helps clients identify kind of their expectations and concerns. It allows them to see, hey, this is what we’ve been spending on X. This is maybe where we can cut back and Y, and allows us to identify, you know, kind of what that comfortable amount is for these clients.

[00:05:16] Alex: In addition to the cash flow analysis, part of our process is we go through current debts and liabilities with our clients. Some example of debts that are typically covered or discussed when discussing insurance can be things like home debt or mortgage, student loans, credit cards, or basically anything that you’d want to take care of.

[00:05:33] Alex: Again, not to be morbid, but if something were to happen to you or your spouse, do we wanna leave them with a mortgage? Do we wanna leave them with college funding that isn’t fully adequately funded? Again, all things to take into consideration and as your financial advisor, that’s where we’re here to take you step by step through this process so that we understand what we’re trying to accomplish.

[00:05:52] Emily: But probably better to be prepared now. Right?

[00:05:54] Alex: Yeah. We always like to be over prepared, right? Um, but again, we, we don’t want to put our clients in, in this pie in the sky number where we’re over insuring them. Again, that’s why it’s important to take our clients through an analysis to help them understand the why behind, um, the reason that we’re prescribing that certain amount of insurance for them.

[00:06:11] Alex: Again, all these are important things to think about. If you or your spouse were to suddenly pass, who would help pay for college? Where did our retirement funding come from? It’s important to discuss with our clients what things they would want to have taken care of for their spouse if they were also no longer with us.

[00:06:27] Alex: No income from the main breadwinner. What, what would that potentially look like for a spouse. Um, no 401k contributions for that person that would unfortunately pass away, right? So now we’re talking about not only do we have their cash flow not being, you know, not being there, um, but additionally when they’re not able to save money on a monthly basis, fund their retirement accounts.

[00:06:46] Alex: So, although the gas may not always necessarily seem immediate, that’s why we provide this in-depth analysis for our clients so we can really pinpoint what’s important to them and their families moving forward.

[00:06:59] Alex: One of the next questions we often go through with clients is, how many children do you have and how many are you planning on having? As we all know, the college, the cost of college tuition has continued to drastically increase, which makes it even more important for us to include this portion when planning for insurance for clients. This is why it’s important for us to ask not only how, how many children they’re having, but what are their intentions when it comes to college.

[00:07:23] Alex: What are the gonna be the cost of living for those children? What about daycare? Any future expenses? Whether your children are involved in sports, music, and any other outside activities. Are they, are these things that potentially wanna still be covered if something were to happen to you, or your spouse?

[00:07:38] Alex: The nice thing about our analysis software is it allows us to provide very specific college costs. Not only can we get specific in regards to state specific schools, we can get private, public, and anywhere in between. The nice thing is also is individualized towards our clients in regards to every parent has a different intent for funding of their kids’ college. Some people may only want to provide two years worth of college and, and you know, let the children provide for the rest. Whereas some parents want to know what exactly it’s gonna cost for a specific school for all four years.

[00:08:09] Emily: Which again, this is also something we talked more specifically, uh, in an education planning podcast back in October. So if any of our listeners are more curious about that specifically, you can go back and listen to that one.

[00:08:23] Alex: Yeah, again, great point. Again, the insurance is just a part of our holistic financial planning, but we wanna make sure that it is covered, especially with our younger clients. especially with young kids.

[00:08:32] Alex: One question we’d like to ask as well with our clients is if something happened to you or one of you tomorrow, would the other spouse continue to work? Or would they plan to work after children reach a certain age? Every family has a different game plan when it comes to dealing with these types of events. It is important to have a plan on what funds are going to come from where in the event of unexpected death. Every parent wants to help their kids as long as they possibly can, but sometimes that’s not feasible for everyone.

[00:08:57] Alex: So we need to be able to have, you know, a game plan when it comes to, okay, maybe we’re paying for our children up to the age of college. Maybe it’s up to 18, maybe it’s through college. Again, each family’s gonna have a different plan, but all important as where is that cashflow going to come from? Well, unfortunately, if something is to happen to either your father or mother, that cashflow can sometimes come from life insurance.

[00:09:19] Alex: In addition to asking about children, college, and all the expenses that come with that, we also include with our clients any other liabilities that they’d like to be taken care of or that would, new ones that would be taken on. Some of our biggest examples are mortgage, car leases, um, and maybe vacation homes or any other debts, um, including credit cards.

[00:09:39] Alex: Again, things that we don’t want our spouse to have to worry about. If anything were to happen to us, there’s gonna obviously be going a lot going on in general. Um, we certainly wanna make sure that a lot of these debts and liabilities are taken care of and not having to be cumbersome.

[00:09:52] Alex: Lastly, we also discuss with our clients legacy goals that they would like to have covered. Sometimes that may be charity endeavors that you’d want to give to, or a dollar amount to help out a family member. Um, again, all things that we can be included and can help be funded by life insurance in the event of an untimely death.

[00:10:09] Emily: Thanks, Alex. All very important questions to help us determine insurance needs. So now that we’ve gone through that entire needs analysis, what are the next steps?

[00:10:19] Alex: Yep, that’s a great question. First, we’d like to discuss on timeframe. Sometimes clients can have immediate need for an insurance or a certain timeframe, but they may not always need that large lump sum of insurance for their whole life.

[00:10:31] Alex: So that’s what the advantage of providing this advices analysis with our clients is, is not only can we pinpoint the timeframe, but also the amount in regards to when that insurance is applicable. For example, let’s say somebody just wanted to make sure that their kids got through college. Well, maybe that life insurance is then a term life insurance policy where it only goes up to a certain point of time.

[00:10:53] Alex: And then after the fact, well, once college is taken care of, then we wouldn’t need that. Again, that’s just one of the specific examples, but that’s something that we would continually, um, you know, review with our clients and make sure that the insurance amount that they currently have on themselves is adequate.

[00:11:08] Alex: This is going to be something that’s always updated. For example, let’s say you have another kid, well, maybe that’s an opportunity to add more life insurance. Or from my previous example, maybe your kids are already gone through college and maybe we need to decrease that amount and you only need to cover the mortgage, let’s say for your spouse.

[00:11:26] Alex: As part of our due diligence as the insurance agent, one of the processes that we follow is what’s called pre underwriting. What we do is send a pre underwriting data, gather questionnaire to our clients so that we can explore the various carriers in regards to the best underwriting conditions, if they have any specific health concerns.

[00:11:44] Alex: The nice thing about working with Mueller Financial Services is we have open architecture and we’re not tied to any specific carriers for insurance products. So depending on each individual situation, we’re able to work with the insurance company that is best fit for each client.

[00:11:57] Emily: Right, because you get different prices based on your health conditions, right? Some carriers may approve those with diabetes, some may not. Or smokers, for instance.

[00:12:08] Alex: Correct. Each carrier tends to underwrite various scenarios differently, so what we’re able to do is work with all of these carriers and see what’s gonna be the best situation for our client.

[00:12:20] Alex: Along with the same lines of being open architecture and providing the best carrier as well as products for our clients. We’re always looking for opportunities, especially with our younger clients, to have the ability to, for example, convert their term policy into a permanent policy over time. Some carriers do allow this without any future underwriting.

[00:12:38] Alex: So especially for our younger clients, we are looking to take advantage of the carriers that do allow us, um, to have that convertible term to permanent policy. And all that means is throughout the life of the policy, the client would have that option to convert that term per that term insurance that they’ve been paying to a permanent policy without having to further go underwriting.

[00:12:58] Alex: As you can see, and everyone goes through life as we get older, typically we do decline in health unfortunately. So this is a nice advantage that we’re always looking for, to provide a benefit for our clients.

[00:13:09] Alex: Lastly, and mostly important part is this is just a piece of the pie, right?

[00:13:14] Alex: You had discussed MoneyGuide Pro, and again, this insurance analysis fits into your overall financial plan. I think we pride ourselves in regards to having the financial plan as a cornerstone for all of our clients. And really the insurance is just a big piece of the pie, and this is something that we’ll continue to view review with our clients over time.

[00:13:32] Alex: We hope that by providing you with an insurance analysis specifically, you can see how important it is to have coverage within your plan, and most importantly, how your plan can be drastically affected if we do not have the proper coverage in place.

[00:13:46] Alex: That is why we’re constantly reviewing your plan and reviewing the insurance needs analysis with our clients every time we have a meeting, just to make sure that everything is adequate, cashflow is still adequate, and most importantly, the insurance coverage is adequate for our clients.

[00:14:01] Emily: Great last point, Alex, and thank you so much for joining today’s podcast. I hope that as our listeners heard these considerations, they thought about their own individual situations. Maybe they’re working with a Wealth Advisor or just need or want to make a couple tweaks to their plan, or maybe they have no current life insurance plan and realize just how important it is. Either way, Alex’s contact information can be found in the show notes if any of our listeners do have any questions, uh, but Alex, any final comments?

[00:14:33] Alex: Just wanna say thanks again for having me and please feel free to reach out to myself or any other Mueller Financial Services team members in regards to any insurance questions or concerns. We’re happy to take a look at your current situation. Thanks again.

[00:14:45] Emily: And thank you for listening. If you’re interested to learn more about our risk analysis and insurance services, or more about Mueller Financial Services in general, visit muellerfinancialsolutions.com where you’ll find more information about the firm services and team members. You can also follow the firm on LinkedIn at Mueller Financial Services, Inc. for more firm updates, insights, and upcoming events.

[00:15:14] Emily: Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IHT Wealth Management, a registered investment advisor. IHT Wealth Management and Mueller Financial Services Inc. are separate entities from LPL Financial.

[00:15:31] Emily: The opinions voice in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

Life Insurance