Forgoing an insurance evaluation is akin to neglecting a health screening; your financial well-being – and that of your spouse, children, parents, business partners and employees – could depend on it.

-Kevin Ta, CFP®, CTFA, AEP®, Senior Wealth Strategist, PNC Wealth Management®

There is a common perception that the sole purpose of life insurance is to provide death benefits to your loved ones following a catastrophic event. However, life insurance can also play a profound role within the context of your overall wealth strategy plans and have a lasting impact for generations to come.

If you are concerned with preserving and transferring your wealth amidst uncertainty in the stock market, increasing healthcare costs, and ongoing tax law changes, you may consider incorporating insurance into your overall wealth strategy plan.

Making the case for a comprehensive insurance review

Many individuals have insurance policies that don’t fit with their long-term visions for their wealth. “Clients come in who either lack coverage or have older policies that no longer align with their current situation,” says Kevin Ta, CFP®, CTFA, AEP®, Senior Wealth Strategist, PNC Wealth Management®. “Absent a comprehensive insurance review, you may be unaware you are paying higher premiums on older policies; your existing policies may not be performing as expected; and there may be alternatives better-suited to your changing circumstances. Worse yet, you may be unaware your current structures do not adequately protect your loved ones or businesses.”

Understanding what is at stake

Ta cautions against the short-sightedness of failing to incorporate risk management and insurance planning into your wealth strategy plans. “Life is unpredictable, and there are many triggering events that could quickly unravel everything you’ve worked for, including your personal and business assets.”

He suggests,

The best plans are those that are executed early, are well-balanced and integrated with your estate, charitable and succession planning.

Ta illustrates four common scenarios in which insurance could play a critical role in your long-term wealth plan.

1. Planning for Long-Term Care

According to the Department of Health and Human Services:

Someone turning age 65 today has almost a 70% chance of needing some type of long-term care during their remaining years.[1]

Worse still, the cost of this care, whether provided through a private care facility or an in-home care professional has been steadily rising. Without proper planning, this costly endeavor could significantly derail your legacy plans and reduce assets that could otherwise be left to your heirs.

By integrating long-term care planning, coupled with your legacy goals and cash flow considerations, your PNC Wealth Management team can help you achieve greater clarity and confidence in navigating various options.

2. Maximizing Your Retirement Income

Your annual pre-tax contributions to a qualified retirement plan may be limited if you earn a high income. The good news is that some forms of life insurance, when prudently designed, may enable you to fund additional income into a tax-efficient accumulation plan for retirement.

3. Addressing Your Taxable Estates 

If you have a taxable estate and want to maximize the amount of assets that you can leave to your heirs, life insurance may be a powerful tool. The death benefits of an insurance policy can be passed on to beneficiaries free of federal income tax. Additionally, life insurance trusts can be created to remove insurance proceeds from your taxable estate, limiting the amount exposed to estate taxes.

Another common strategy is to earmark insurance proceeds to provide liquidity to cover estate taxes and settlements. This becomes especially important in estates with non-liquid assets, offering a more efficient means to cover your estate’s tax bill.

4. Managing Your Business Succession Needs 

For business owners with a heavy concentration in non-liquid assets, a premature death or disability could severely cripple the business, limit its ability to hire replacement resources and hamper its continuity plans. Life insurance – when properly designed and used in conjunction with a Buy-Sell Agreement – creates liquidity and flexibility for the business and its owners. The death benefits can be paid to surviving family members as payment for interest in the business or if there are sufficient cash values, it may be accessed to purchase interest following an owner’s retirement or disability.

Don't short-change yourself

Given the sheer versatility that life insurance offers, it’s important to explore the role it could play in your unique situation. Ta says, “Forgoing an insurance evaluation is akin to neglecting a health screening; your financial well-being – and that of your spouse, children, parents, business partners and employees – could depend on it.”

Next Steps

  • Is your life insurance and long-term care adequate for your future needs?
  • Beneficiary check: Are your plan beneficiaries up-to-date?
  • Review your overall wealth strategy — Learn more about working with PNC Wealth Management, a holistic approach to planning for your wealth, investment and banking needs.