September is life insurance awareness month

Each September Life Happens www.lifehappens.org coordinates Life Insurance Awareness Month. This industry-wide campaign is aimed at educating Americans about the importance of life insurance and helping them get the coverage they need. At RAA, we believe that education is the key to financial success.

Roswell Asset Advisors became a state licensed insurance agency this year allowing us to offer a wide array of life insurance and annuity products to our clients.

Throughout the month we will be sharing educational tidbits on our social media pages.

Click the logos below to be taken to our Facebook and LinkedIn pages.

Let’s dive right in with both feet…

• According to the national association of insurance and financial advisors (NAIFA), too many people are taking an unnecessary risk by not protecting their loved ones with life insurance.
• According to the 2016 Insurance Barometer Study by Life Happens and LIMRA, 1 in 3 households would have immediate trouble paying living expenses if the primary wage earner died. The study also found that 40% haven’t bought life insurance or more of it because they’re unsure of how much or what type to buy.

As we read these two statements, we felt it was important to make sure that you know we are here to help.  Whether you have life insurance or not, it is very important to review the risks you face and discuss opportunities to guard against those risks. 

At RAA, we want to help you become Financially Fit. 

Just like a good doctor or personal trainer...our job is to keep you healthy.  A critical step in the process to being healthy is to the reduce the risks you face.  Whether we are talking about quitting smoking and eating a more balanced diet or buying term insurance and diversifying your investment portfolio, the idea is to create a way to obtain your goals with less risk.  As a CFP practitioner, I have taken an oath to work with clients through a 6-step process to examine the risks they face and recommend solutions to reduce or eliminate those risks.

For most people and in most cases, economical term life insurance can be used as a foundation to protect against loss due to death and improve your family's financial fitness.  Term insurance is temporary coverage designed to cover risks for a certain period of time.  For others and in some situations, permanent life insurance is the preferred solution.  Permanent life insurance is designed to be just as the name says…permanent.  As long as you continue to make premium payments, the policy will stay in force.  One important difference between term and permanent insurance is the ability to build cash value.  Cash value is an asset that can be used to fund future goals, make premium payments or add to the death benefit your heirs will ultimately receive.

We get leery when financial strategies and planning propositions are advertised directly by insurance companies.  We feel better when a well-respected organization like The American College of Financial Services or the Certified Financial Planner Board supports or suggests a strategy or a process to provide a financial solution.

Below are a couple of examples.  We hope you find them helpful.

Click the logos below for an article from the CFP Board explaining how to calculate the right amount of life insurance coverage and an article from Jamie Hopkins, Co-Director of the American College’s New York Life Center for Retirement Income and an Associate Professor of Taxation at the American College talking about Long Term Care.

Let's continue...

Much like your auto or your homeowners insurance, life insurance can cover multiple risks. Let me give you an example. The typical auto insurance policy has several different coverages. Bodily injury, property damage, collision, comprehensive and uninsured motorist to name a few. You can also opt to add glass or medical payments coverage. With homeowners insurance you have coverage for dwelling, personal property, liability and other structures. Similar to an auto policy, you can opt for additional coverage for flooding or scheduled personal property such as jewelry, fine china and other valuable items. In today’s world, life insurance can act much like this. Similar to auto and homeowners policies, you can elect coverage for several other risks within a life insurance policy. For example, chronic illness, terminal illness, or long-term care benefits. The faltering of many Long Term Care insurance providers has driven many to explore these “living benefits”.  This is discussed by Jamie Hopkins in the article referenced above.  A living benefit (as opposed to a death benefit) is defined as an option added to the life insurance contract which enables the policy owner to apply for an advanced payment on the death benefit during the lifetime of the insured. Keep in mind that these living benefits often require certain qualifications and although some are included in the policy, they are typically offered for an additional fee. Another living benefit we see gaining more popularity is lifetime income. Some life policies now offer features much like an annuity with which you can receive an income stream in retirement.

Please keep in mind that as with any investment or insurance policy, one must carefully consider the features and benefits as well as the pros, cons and costs before making a decision.   

I would like to wrap up with a quick true story that explains how life insurance can not only be very important at death, but can be a very helpful tool during life as well.

You never know when the cash value of a life insurance might come in handy.  Let me give you a very recent true example of a financial event that was made possible because of a cash value life insurance policy.  We recently assisted a client with selling her home. Unfortunately, this woman was a recent widow and faced with having to sell a home worth less than the total of her liabilities.  Needless to say, this was an emotional transaction for all parties involved.  She came to us for advice and to help find a solution.  Because her top priority was to move on with her life and get out of this home, she was considering an offer that was not enough to pay off what she owed on the home.  After some digging and a few phone calls to her other financial providers, we uncovered that she had built up enough cash value in a universal life insurance policy to allow her to take a tax-free loan for enough money to pay down her liabilities and accept this offer allowing her to sell her home and move on with her life as she had hoped.  Worth noting is the fact that she was considering taking money from her IRA.  That would have been a taxable distribution.  By taking the cash value, we were not only able to accomplish her goal, we saved her on taxes too. 

Of course, as with any financial transaction there are always pros and cons.  As a result of this loan, her heirs may get less at the time of her death (death benefit minus the outstanding loan balance).  However, I can assure you that her children would much prefer her to be out of this home and on with the next phase of her life.  

In conclusion, if you have questions about your current life insurance or annuity or if you are unsure if you have enough life insurance or should consider an annuity, please contact us for a consultation.

Market and Economic Commentary

This month we wanted to share a couple of snippets from some very recent commentary from one of our most trusted research sources, the BlackRock Investment Institute...

Financial markets are sending conflicting messages. Record highs for U.S. equities and muted volatility are at odds with typical risk-off signals such as tumbling EM (Emerging Markets) currencies, weakness in industrial commodity prices and strength in defensive stocks. Why? We see a dissonance, with rising macro uncertainty and gradually tightening financial conditions set alongside still strong economic and earnings growth.

Investors returning from summer breaks face mixed messages from markets. The chart above shows 2018 performance for selected asset classes year-to-date (orange dot) and as of May 31 (blue dot), before the latest EM swoon. U.S. equities have marched higher since summer’s start, propelled by another quarter of solid sales and profit growth. 83% of U.S. firms beat second-quarter earnings estimates. Broad-based, robust sales growth shows the profit boost came from solid demand and not just tax cuts. Yet global minimum volatility equities have rebounded, typically a sign that investors are looking for safety. We believe investors are seeking resilience as they adjust to heightened economic uncertainty and moderately tighter financial conditions, partly reflecting rising trade tensions and a firmer U.S. dollar.

A string of rolling market shocks this year did not snowball into something more systemic. We believe this was due to ongoing support from strong economic growth. Yet an uneasy equilibrium prevails. The longer macro uncertainty persists, the greater the risk of waning business confidence undermining investment spending. Risk assets are already pricing in significant downside, in our view. Any signs of declining uncertainty could spur a swift rally in risk assets such as EM equities, as prices catch up with strong earnings growth.

We expect the outlook to remain murky in the short-term. There are few indications that the U.S. and China are close to a reconciliation on trade disputes. We do not see either side willing to compromise. This warrants a focus on portfolio resilience. Bottom line: Strong earnings growth, particularly in the U.S., underpins our preference for equities over debt. We still like the momentum factor, along with a tilt toward quality for resilience. We believe fixed income investors should focus on shorter duration and higher-quality credit.

At RAA, we are focused on providing quality long term performance for our clients.  We believe it is very important to remain diversified and refrain from chasing returns.  As the chart above from BlackRock shows, there has been quite a difference in returns among different asset classes this year.  Sometimes being properly diversified and owning several asset classes dampers returns in the short term while aiming to provide solid returns in the long term.  It is important to remember that a byproduct of the same diversified portfolio is reduced volatility and decreased risk over time.  Risk management is very important when investing.  We also believe that market volatility creates opportunities.  These opportunities often take time to come to fruition.  We continually monitor our portfolios looking for ways to capitalize on these unrealized opportunities while keeping risk at reasonable levels.  As one of the world's most famous investors, Warren Buffet, says "as an investor, it is wise to be Fearful when others are greedy and greedy when others are fearful.” This statement is somewhat of a contrarian view on stock markets and relates directly to the price of an asset: when others are greedy, prices typically boil over, and one should be cautious so as not to overpay for an asset which subsequently leads to anemic or negative returns. When others are fearful, it may present a good value buying opportunity.  We think this quote fits well into today's global market environment as we are seeing a high level of divergence among the performance of different investment categories.

As always, we welcome your questions and comments.  We are only an email or phone call away.  

We look forward to hearing from you.