SECTION XI - Life Insurance and Financial Planning
A loss exposure is any condition or situation that presents the possibility of a 
financialloss. A personal loss exposure is a type of exposure that has a financial impact on individuals and families.
Financial planning is a process that helps individuals and families to identify their financial goals and to develop a realistic plan for attaining these goals. Common financial goals include an increase in personal wealth,a higher standard of living, protection of the family and property, accumulating a fund for retirement, the purchase of a home, a college education for the children, an emergency fund, getting out of debt, and minimizing federal and state income and estate taxes.
Developing a proper financial plan may require the assistance of an accountant and an attorney in addition to an insurance agent. Depending upon the size and complexity of an insured's estate, the services of a trust officer may also be needed to implement certain features of a financial plan.
Determining amounts of life insurance to recommend requires planning. Individuals have needs and goals which must be considered and analyzed.
Planning usually involves a detailed needs analysis, based on the proposed insured's income, marital and family status, objectives, and personal preferences and priorities. Some companies provide agents with formulas, checklists and other tools which may be used in the information gathering and planning process. Request a FREE Life Insurance Quote
A proper needs analysis should consider both the needs created by the possibility of premature death and the needs created by the possibility of living for a long time.
When establishing the role for life insurance in a financial plan, the potential tax consequences should be considered.
The financial insecurity associated with most personal loss exposures can be reduced or eliminated by adequate life and health insurance, disability income insurance, and retirement plans. Individuals and families often have additional financial goals, such as saving for a down payment on a home or the children's college education. Attaining these goals requires a financial plan, including an effective savings and investment program.
Developing a Financial Plan
Financial planning is a process that helps individuals and families' to identify their financial goals and objectives and to develop a realistic plan for attaining these goals. The process involves five steps:
Gather important financial information. The first step in financial planning is to gather relevant and important financial information, including the following:
a. Current income-the amount of monthly and annual earnings, net take-home pay, and other sources of income.
b. Assets-present financial assets, including stocks, bonds, mutual funds, and savings accounts; value of individual retirement accounts (IRAs) and employer sponsored pension or retirement plans; value of life insurance policies and real estate.
c. Outstanding liabilities and debts-the amount of present installment debts, remaining mortgage balances, and educational and other loans.
d. Current spending-preparation of a monthly or yearly cash flow statement to determine the amounts spent on food, housing, installment debts, medical bills, insurance premiums, taxes, and other necessary living expenses.
e. Number and ages of dependents.
Analyze the present financial situation. This step includes a review of spending habits to determine whether the individual is spending more than his or her annual income. It also includes a review of outstanding debts, amounts presently saved and invested, and net worth.
Determine specific financial goals and objectives.
Design a financial plan for attaining these goals. The financial plan should be realistic and have a time limit. The plan should include drawing up a cash-flow budget so that spending does not continuously exceed income over an extended period with a subsequent increase in consumer debt.
Periodically review and revise the plan. The financial plan should be reviewed periodically and changed if marriage, birth, divorce, job change, disability, unemployment, or any other change affects finances. Request a FREE Life Insurance Quote
Net worth is the difference between assets and liabilities.
Common Financial Goals
An effective financial plan requires identifying specific financial goals and objectives. Many Americans do not have well-defined financial goals. Many Americans have little financial expertise and require increased knowledge about personal financial planning, especially with respect to life and health insurance and mutual fund investments.
Because all individuals and families are not the same, financial goals and objectives differ. However, certain financial goals are common to most individuals and families:
Increase in Personal Wealth
Most Americans would like to increase the amount of their present savings and personal wealth. Request a FREE Life Insurance Quote
