By Allan Roney
CEO, New York Life Korea
We all have different financial needs and objectives. But life insurance plays a fundamental role in most of our plans for financial security. That's because of the variety of life insurance plans available, and the many ways they can be customized to meet unique needs at different periods of your life.
The most fundamental form of permanent life insurance is whole life. In good times and bad, whole life insurance can help. Whether it's to assist your family in case of a financial emergency, pay for a child's college education, buy a new home or to supplement retirement income, whole life may be right for you.
Whole life is the traditional form of permanent life insurance. You are insured for your entire life, provided you continue to pay premiums. And the premium is guaranteed to stay level over the life of the policy.
To many, the primary reason for having life insurance is to protect their family's financial future. Beneficiaries can use the death benefit to help pay off mortgages, fund college educations, take care of final expenses, or offset the loss of the insured's income.
It was after IMF, that whole life insurance began to be sold regularly in Korea. Whole life insurance was initially sold by foreign insurers targeting large income professionals in their forties to fifties. Over 7 million cases have now been sold in the Korean market, as the number of subscribers drastically increased by domestic insurers joining the market in 2000.
However, despite such rapid growth, Korean consumers' level of protection through whole life insurance still does not seem to be adequate. According to the data of the National Statistical Office, in 2005, 54 percent of Korean deceased males died between the ages of thirty to sixty, precisely at the time when, as the patriarch, they still have substantial family responsibilities. The causes of death were cancer, which ranks first, disease of blood vessels (head), cardiac disorder and suicide. Yet, the average death benefit for whole life contracts was only 15.1 million won, according to the survey by Life Insurance Association. That is not even half of 32.2 million won, which was the average of city household expenses last year. It means the bereaved family only has enough money to cover six months of normal expenses after their patriarch dies.
The one certain thing in life is that we all die some day and conversely, the most uncertain thing is that none of us know when that will happen. It is vital that families prepare for the typical risks in life such as early death, living longer than expected and fatal disease by taking out insurance. You must prepare so that the family's basic living needs are not threatened - needs such as living expenses, education expenses and living expenses for your spouse's old age. The best way to protect you and your family against life's risks is life insurance. For this purpose, whole life insurance is one of the best inventions of the 20th century, since people can get to acquire large amounts of protection through insurance, unrelated to the cause of death.
Whole life is a steady performer regardless of economic factors. When times are good the benefits of whole life insurance are clear and when times are bad it is still an important part of a sound financial plan. Here's why:
Firstly, the money is yours ― Whole life builds cash value tax-deferred over time, and you can put that money to work for you in a number of ways. You can borrow from your policy's accumulated cash value by taking a loan at competitive interest rates and use this money in any way you wish. It's yours to spend. In addition, in most countries life insurance cash values are not exposed to liability judgments and are exempt from creditors, a unique benefit not offered by other investments.
Secondly, it grows with you ― In addition to providing valuable life insurance protection and building cash value, whole life is flexible. Your whole life policy can expand to provide greater protection and cash value as your needs increase. Various policy features allow you to boost your coverage, add family members to the policy or even through the use of policy riders guarantee that premiums will continue to be paid should you become totally disabled.
Christmas is coming soon. Most of us don't think of the holiday season as a good time to meet with family members to discuss such topics as who should have power of attorney, the location of our living will, questions about estate planning, or other family issues. However, very often, the holidays are in fact the best time to discuss such family matters.
Here is a recommended checklist of topics to cover. (Feel free to copy and use it in your family meeting, adding items as needed.) All adult family members should be encouraged to complete it before the meeting. Then use each item as a platform for discussion.
1. Do I have an updated will? (All adults should have one, not just senior family members.)
2. Are there specific family heirlooms I would like to receive someday (or give to a specific family member)? These decisions can be included in your will.
3. Do I have guardians for minor children?
4. Do I have a living will and medical power of attorney?
5. Are my life insurance, pension, and annuity beneficiary designations current?
6. Do I have a list of important information, such as bank and other account numbers, life insurance policies, retirement accounts, and other assets, along with the names and contact information of my attorney, accountant, financial consultant, and other professionals?
This Christmas, how about scheduling some time off to the side so parents, siblings and adult children can discuss important family matters as above?