Welcome back to Metcalf Money Moment! In this episode, hosts Jeb, Ethan, and Eric dive into a crucial topic just ahead of Life Insurance Awareness Month: life insurance. While talking about mortality is rarely anyone's favorite pastime, securing the right coverage is essential to protect your loved ones and build a comprehensive financial plan. The team breaks down common misconceptions, explains why many people drastically overestimate the cost of basic term insurance, and covers the exact questions you should ask to determine your coverage needs. Whether you are evaluating a basic term policy, exploring permanent insurance options, or considering advanced strategies for high-net-worth individuals, this episode offers practical clarity. Tune in to learn why reviewing your policies and updating your beneficiaries regularly is vital for financial peace of mind.

What you will learn in this Episode:

✅ Master the fundamentals of life insurance planning to protect your family's future

✅ Compare term insurance and permanent options like whole life policies

✅ Discover advanced strategies utilizing estate planning and cash value accounts

✅ Hear about why reviewing your policy is critical

Tune into the Metcalf Money Moment podcast for expert insights on wealth management and retirement planning! Join Jeb, Ethan, and Eric for practical Estate Planning strategies that you can implement to unlock financial clarity and confidence. Listen now to inspire your financial journey!

TIMESTAMPS:

00:00 Introduction to life insurance planning basics

04:15 Exploring how much coverage you need

08:00 Breaking down term life, whole life versus universal life and cash value mechanics

14:13 Discussing high net worth strategies and estate planning liquidity solutions.

20:44 Reviewing business succession and key person insurance for corporate protection

22:47 Final thoughts on policy reviews, updating beneficiaries, and closing remarks

KEY TAKEAWAYS:

💎 Evaluate your life insurance planning needs regularly as life changes

💎 Utilize term insurance to cover temporary family income replacement gaps

💎 Implement estate liquidity strategies for tax efficiency and asset protection

DISCLAIMER:

This information is not intended to be a substitute for specific individualized tax or legal advice. We recommend discussing your particular situation with a qualified tax or legal advisor.

RESOURCES MENTIONED:

Metcalf Partners - Website

Jeb Graham - LinkedIn

Ethan Hutcheson - LinkedIn

Eric Wymore - LinkedIn

Metcalf Money Moment, Jeb Graham, Ethan Hutcheson, Eric Wymore, Estate Planning, Life Insurance Planning, Term Insurance, Whole Life, Universal Life, Variable Life, Estate Planning, Pension Max, Death Benefit, Cash Value, Financial Planning, Insurance Policy

Now your hosts[00:00:30]

Ethan Hutcheson: great. Doing good.

Jeb Graham: Good to go. Still got my roof

Ethan Hutcheson: on my house after that storm.

Ethan Hutcheson: Yep.

And, uh, the reason is, is that nobody really loves to talk about their [00:01:20] death or dying or what would happen if one of their family members died. Um, so because of [00:01:25] that, it becomes very, very easy to put off. And, you know, a lot of times it just doesn't seem like it's ever gonna [00:01:30] happen to you, right? That, that someone in your own family is gonna pass away.

But the bottom line is, um, well, and I, and I will tell you too, is that life insurance, [00:01:55] the, what we're talking about there is, is protection for your family, right? And there's also life insurance that can be used as [00:02:00] a tool for wealthier people that we're gonna go through later in the podcast as well. So, but I think in [00:02:05] the, in the beginning, uh, the big question is, is if something happened to you today, would the [00:02:10] people who depend on you be financially okay?

Because, you know, someone with a family [00:02:30] is probably much more likely to need and have life insurance than someone, uh, that's a single person, [00:02:35] and so on and so forth. But about 40% of adults say that their loved ones would be barely [00:02:40] financially secure or not financially secure at all if their household's [00:02:45] primary wage earner died unexpectedly.

So, a- and I will tell you this, especially as, as people are younger, I think that people frequently [00:03:15] assume that life insurance is much more expensive than it really is. You know, you can go out and get a [00:03:20] million or a $2 million 10-year term policy, and it's... You'd be surprised, if you're a healthy young [00:03:25] person, how little, uh, you have to pay to get that.

Number three, when does [00:03:50] permanent life insurance make sense for somebody as opposed to term? And then number four, we'll kind of [00:03:55] go into that, that life insurance as a tool is, why do wealthy families sometimes own enormous [00:04:00] life insurance policies even though they clearly don't need that, uh, their, their [00:04:05] family doesn't need a big life insurance settlement if they pass away?

Ethan Hutcheson: Awesome. Yeah. [00:04:15] That's-- So when you think about how much life insurance you need, I hear it all the [00:04:20] time. I hear two sides of the equation. I hear someone say, "Oh, I've got a $2 million term," [00:04:25] or, "I need $2 million for 20 years." And then I hear people say, "Oh, I've got life insurance through my [00:04:30] company."

So you, you're gonna need to supplement with a [00:04:50] policy outside. And when you think about what you need outside of your, your [00:04:55] employer-sponsored plan or your employer-sponsored life insurance, never kind of just throw [00:05:00] a blanket over it and say, "Uh, $2 million sounds like a good number to me." Ask ourselves or [00:05:05] ask yourself, "What financial problem am I trying to solve if I die?"

That'll give [00:05:30] my wife two years to kind of figure out, you know, what, get a job, get the kids some help or whatever." That- [00:05:35] that's probably, you know, again, not enough, not enough there. You wanna understand [00:05:40] what you're trying to solve if you die. So, you wanna look at, you know, your earnings. So, if you [00:05:45] make $100,000 a year, k- a good rule of thumb is 10 times that for a, as [00:05:50] a starting point, so you're looking at a million dollar policy.

Then you kind of wanna say, "Okay, how long am I gonna need this? When are my assets that I'm saving for [00:06:15] retirement gonna kind of add up to enough to where I've got a nest egg to where my wife would [00:06:20] need that life insurance?" And there's also, you know, two sides to that story as well, [00:06:25] because when you're 55 years old or 50 years old and you might pass away, you [00:06:30] could have $2 or $3 million sitting in your retirement accounts.

And to Jeb's point earlier, you know, the, the more [00:06:55] wealthy families that, that on the tail end of their life might buy insurance, it all [00:07:00] boils back to that exact question: What financial problem am I trying to solve if I die? [00:07:05] Do I need to take care of my family? Do I need to t- take care of my estate? Do I need to take care of my [00:07:10] heirs?

It might not need to be as [00:07:30] big, um, but you're gonna, if, if the non-working spouse passes away, um, you're gonna [00:07:35] need childcare, you're gonna need transportation, you're gonna need a nanny, someone to pick the kids up to and from school. So, [00:07:40] there's a lot of extra costs built in, and just because, um, you know, that spouse [00:07:45] doesn't have income does not mean that they don't have some sort of economic value tied to [00:07:50] that household.

Eric Wymore: And [00:08:00] so the, you know, the, the next question that, uh, we're gonna, gonna answer today [00:08:05] is what's the difference between term policy, whole life policy [00:08:10] versus a universal or a variable universal life policy?

Um, probably one of our most quoted, uh, types of [00:08:40] insurance is that 20-year term policy for a younger couple or younger [00:08:45] family that's just trying to make sure that they cover, you know, for those, uh, [00:08:50] cover, cover any kind of expenses or loss of income for when they have young children at [00:08:55] home. Uh, the, you know, the other, [00:09:00] the other big thing that we use a term insurance for, uh, is called a pension max.[00:09:05]

So it's gonna be a little bit less. Um, so oftentimes we'll take a look at, hey, can we [00:09:30] get a, you know, temporary or a term policy, uh, [00:09:35] for much less than $500 a month? 'Cause that's the difference between 2,000 and 1,500. And [00:09:40] oftentimes we can, and so we'll still have the individual take that [00:09:45] single life pension, the, the maximum amount, and then we'll [00:09:50] use a little bit of that money and buy a, uh, term insurance to help cover if something [00:09:55] should happen to them, you know, early, early on.

That, all that is is life insurance on one of, on [00:10:20] the primary individual that has the pension. And so if you, um, [00:10:25] if you buy a life insurance policy to supplement that, number one is, is if [00:10:30] the s- the spouse dies, you're not permanently left with a lower benefit, right? So there's a lot of, uh... [00:10:35] Anyway, there, there's some pretty creative things that you can do, and those are actually fun to go through for us as, as [00:10:40] advisors as well, so.

And [00:11:05] so, you know, again, I think generally speaking, we're kind of in the [00:11:10] buy term, invest the difference, um, use it, you know, get the coverage that you need, [00:11:15] as Ethan mentioned, fill that gap, and then if you've got extra [00:11:20] funds on a monthly basis, start investing that. Um, next [00:11:25] policy, you know, the first type of permanent policy is, is a whole life.[00:11:30]

Um, [00:12:00] again, it's a little bit more of a permanent based needs. Like, you [00:12:05] know, you're gonna have to commit to it for quite a while to make those premiums. And I think at some point in time, [00:12:10] usually the design of those plans is eventually those dividends will [00:12:15] ultimately be large enough that they make the premium payment and, and you won't, you'll have what's [00:12:20] called like a paid up in full, uh, type of policy.

And what that does is just, it means it's flexible premiums, flexible death benefit, [00:12:55] uh, flexible coverage Uh, it is, you know, [00:13:00] you're, you're able to make adjustments even after the policy is written. [00:13:05] Um, obviously again, continuing to need to be monitored, uh, as, [00:13:10] as life expectancies change and the val- the cost of the insurance will change.

So it all just kind of depends on what [00:13:50] your comfort level is, what your objective is, as Ethan was mentioning. [00:13:55] Um, but I'll tell you, there is some pretty cool things, and I know, Jeb, you're [00:14:00] gonna mention this, on what you can do if you're kind of in the, uh, the higher net worth [00:14:05] category and why you'd wanna still have life insurance even though, you know, maybe your [00:14:10] investment accounts are pretty flush.

Jeb Graham: Yep, 100%. So-

Eric Wymore: Yeah ...

And I will tell you, I [00:14:30] feel like, and, and I think we could say universally in this office, we feel like, you know, [00:14:35] uh, that Eric mentioned, we, we kind of like term, invest the, the rest. And I think that permanent policy [00:14:40] certainly has a place and even over-funding a permanent policy. But I also think there's a lot of abuses that [00:14:45] go on out there, where people maybe use life insurance when it's probably not the right [00:14:50] tool because of the fact that it can pay higher commissions and people can, uh, make, [00:14:55] you know, advisors can make money, uh, quickly off of that, and that's not necessarily a universal [00:15:00] statement.

So if they died, their income probably doesn't matter that much because [00:15:25] they've got these, a lot of assets that they can live off of over time [00:15:30] However, life insurance can certainly, uh, serve a completely different purpose. And I think one thing that [00:15:35] people forget at times is that number one is a life insurance death [00:15:40] benefit pays out tax-free.

So So whether it's [00:16:20] just an individual that says, "Hey, I wanna leave money to my heirs for whatever reason, [00:16:25] and I've got a bunch of money in the market, I've got a bunch of money in real estate, and I just wanna diversify [00:16:30] my asset base, so I'm gonna over-fund this, this whole life insurance policy that I know is gonna pay me [00:16:35] somewhere between 4% and 6% a year, and then my heirs are gonna get this big death [00:16:40] benefit tax-free someday."

But let's just say that we have a client that owns [00:17:05] either a tightly held business, right? That's worth a lot of money. They own a bunch of real estate [00:17:10] that's worth a lot of money. Or say, a farm. Uh, well, all of those things, uh, you know, [00:17:15] basically when they die, they might wanna pass that on to their beneficiaries, but there's not a [00:17:20] lot of liquidity there, right?

So that's one example. But then the other one is, let's say you have a business or a farm or [00:17:50] real estate that's worth over the estate tax exemption. Okay? To, to [00:17:55] just kind of reiterate, I know we've talked about this on this show a lot, but the estate tax [00:18:00] exemption is $15 million for an individual, $30 million for a couple.

Well, their kids, basically, the first $30 million of that business [00:18:35] that they get, uh, is gonna be estate tax free because it's under the [00:18:40] exemption level. Well, now there's $40 million that's over the estate tax. Okay? So that's basically [00:18:45] close to a $20 million tax bill that they have upon their parents' death and when they inherit the [00:18:50] company.

That [00:19:10] would go for real estate. That would go for a farm. As well. Um, and then if you wanted to take that a [00:19:15] step further, a lot of times people will use what are called irrevocable life insurance trusts. This is [00:19:20] kind of getting into the legal realm here and something that an attorney might recommend. But if you, uh, [00:19:25] were to use an irrevocable life insurance trust, what that does is you set up a trust, it has its own tax ID [00:19:30] number.

So, [00:19:50] so that's a useful tool that a lot of people, um, use, and I would, I [00:19:55] would tell you this, this definitely... Like if you're going through a strategy like that, it takes very careful [00:20:00] coordination between, uh, an estate planning attorney, a CPA, your financial advisor, and an [00:20:05] insurance professional, which for us and our clients, it would be the financial advisor and the insurance persh- [00:20:10] professional would be the same person.

So you would take basically a [00:20:35] life insurance policy out for each of the other kids to try to, try to, uh [00:20:40] In essence, um, you know, equalize the estate so that it's fair for the kids. And [00:20:45] so, and then lastly, we'll go into, to business succession. Um, you know, [00:20:50] this is a business owned by multiple partners, so you think about a couple of things in our business when we [00:20:55] talk about number one is we need a buy/sell agreement.

And then a [00:21:15] big one's key person insurance. So think about if you own a business, and you have one [00:21:20] salesperson that generates half of the revenue of that business, and if that salesperson dies, all of a [00:21:25] sudden you're missing a lot of revenue for, for that business. So, so you might want to take out a life [00:21:30] insurance policy on that individual just to make sure that if they die, the, the business stays [00:21:35] solvent till you have time to replace, uh, you know, that revenue.

And if [00:22:00] your situation has changed in the last 5 to 10 years, which I would say probably 100% of [00:22:05] the people that are listening to this, their situation's changed in some regard over the last 5 to 10 years, [00:22:10] it might be a good time just to send us over, uh, your current policies, and if we, we might have been [00:22:15] the ones that actually put the oth- other ones in place.

Where all of a sudden you've had this [00:22:35] life insurance, and you don't need it anymore because there's not really an insurable risk. And so that's [00:22:40] always kind of a fun conversation to be able to have with people too. Like, "Do I finally get to quit paying this $300 [00:22:45] a month that I'm... You know, that's probably never going to get used?"

Eric Wymore: Yeah. Yeah, I think you hit it on the head. A [00:22:55] couple things, you know. As wealth grows, I mean, the reasons for owning insurance change. And [00:23:00] then also check your beneficiaries. Things happen- Oh,

Jeb Graham: yeah

Jeb Graham: And I will tell you that that is a really good point. Okay. Because I feel like people call us all [00:23:20] the time to change the beneficiary on their IRA, uh, or their IRA or their, [00:23:25] you know, even their trust to update their trust, and, uh, I think sometimes they forget about those life [00:23:30] insurance policies- That's right.

Yep ... that are out there, and that would be- Absolutely ... a travesty if it paid to the wrong person, right?

Jeb Graham: right. There you go. That's right. [00:23:40] Well, very good, guys. Well, this is Metcalfe Money Moments podcast signing off.[00:23:45]

Disclaimer: Jib Graham, Ethan Hutchison, and Eric Wymore are [00:24:15] registered representatives with and securities offered through LPL Financial, member FINRA SIPC. Investment advice offered through [00:24:20] WCG Wealth Advisors, a registered investment advisor. WCG Wealth Advisors and Metcalf Partners Wealth Management is a [00:24:25] are separate entity-- entities from LPL Financial.

All performance referenced is historical and is no guarantee of future results. All [00:24:40] indices are unmanaged and may not be invested into directly