Life Insurance Policy: Select a Policy for Long-Term Financial Planning

Investor Economic and Financial Education

When evaluating the long-term prospects for one’s financial goals, there are a variety of risk management factors to consider. Each investor has his or her own particular financial plan based upon the adjusted risk and return required for future planning. Life insurance policies can play a role in helping to structure a long-run financial plan to address uncertainty in the future.
The Role of Life Insurance in Financial Planning
To properly evaluate importance of life insurance for your overall financial plan, it’s important to understand how the policies work in practice. By making an investment in a defined life insurance benefit, one may ensure the future flow of income to your family or other beneficiaries even under uncertain circumstances. With a forward-looking approach to financial planning it’s possible to create a contingency plan to adjust for an uncertain life expectancy, and to still ensure one’s dependents are financially secure in the process.
By creating a long-term financial plan it’s possible to budget for future living expenses, such as medical liabilities, educational costs and household payments. Creating an investment strategy which ensures these obligations are met in the face of uncertainty requires careful consideration of a life insurance policy. Structured life insurance policies limit the tax liabilities to one’s beneficiaries, and can help secure long term financial goals in the face of an uncertain income stream.
Importantly, the decision to invest in a life insurance policy requires active evaluation, management and consideration, like any financial allocation decision. As financial and risk circumstances change, one should continually revisit the structure of a life insurance policy. Each individual policy is structured according to several parameters including its term, defined benefits and contributions as well as the beneficiaries.
The decision to invest in life insurance should be made in light of one’s overall portfolio allocation decisions. Financial professionals may help determine how a proper policy fits into one’s long run financial plan to limit risk and help ensure your financial goals are met.