Sometimes life insurance doesn’t get the credit it deserves.
Most of us know it’s used to replace income if the worst were to happen, but that’s about it. This week, I have had several appointments with money savvy twenty-something year olds who were pleasantly surprised to find out how much of a benefit life insurance can be to them right now.
Life insurance can be a multi-faceted financial tool that has many interesting applications. In fact, there’s probably a life insurance policy for most every person or situation.
Read on for some uses of life insurance you may be able to take advantage of when you’re young – you might find some interesting surprises!
If you have your eye on entrepreneurship, life insurance can be of great service. Some types of business loans may require you to have a life insurance policy as collateral. If you have an eye on starting a business and think you may need a business loan, put a life insurance policy into place.
Pay off debt
A permanent life insurance policy has cash value. This is the amount the policy is worth should you choose to cash it in before the death benefit is needed. If you’re in a financial bind with debt – maybe from unexpected medical expenses or some other emergency you weren’t anticipating – using the cash value on the policy to pay off the debt may be an option. Some policies will even let you borrow against this cash value and repay it back with interest. (Note: If you’re thinking about utilizing the cash benefit of your life insurance policy, talk to a financial professional about the consequences.)
If a certain cause or charity is near and dear to you, consider using the death benefit of a life insurance policy as a charitable gift. You can select your favorite charity or nonprofit organization and list them as a beneficiary on your life insurance policy. This will allow them to receive a tax-free gift when you pass away.
Leave a legacy of wealth
A life insurance policy can serve as a legacy to your beneficiaries. Consider purchasing a life insurance policy to serve as an inheritance. This is a good option if you are planning on using most or all of your savings during your non-working retirement years.
Mortgage down payment
The cash value of a whole life policy may be able to be used for large expenses, such as home buying. A whole life policy can serve as a down payment on a home – for you or for your children or grandchildren.
Key man insurance
Key man insurance is a useful tool for businesses. A key person is someone in your business with proprietary knowledge or some other business knowledge on which your business depends.
A business may purchase a life insurance policy on a key man (or woman) to help the business navigate the readjustment should that person die unexpectedly. A life insurance policy can help the business bridge that time and potential downturn in income, and help cover expenses to deal with the loss.
Financing college education
With the rising cost of college tuition, many families are looking for tools to finance their children’s college education. You may consider using the cash value of your life insurance policy to help with college tuition. Just remember to account for any possible tax implications you may incur.
Life insurance policies have many uses. There are great applications for young people, business owners, and just about anyone. Talk to a financial professional about your financial wishes to see how a life insurance policy can work for you.
Starting your business requires making a myriad of decisions.
You’ll have to consider everything from a marketing budget to the theme of your website to how you’re going to arrange your office. But if you give careful consideration to the financial decisions concerning your business, you’ll start off on the right foot.
What is your business structure going to be?
Business structures have different tax and liability implications, so although there are only a few to choose from, make your selection carefully. You may consider:
A sole proprietorship is the simplest of business structures. It means there is no legal or tax difference between your personal finances and your business finances. This means you’re personally responsible for business debts and taxes.
Limited Liability Company
Under an LLC, profits and taxes are filed with the owners’ tax returns, but there is some liability protection in place.
A corporation has its own tax entity separate from the owners. It requires special paperwork and filings to set up, and there are fees involved.
Do you need employees
This may be a difficult decision to make at first. It will most likely depend on the performance of your business. If you are selling goods or a service and have only a few orders a day, it might not make sense to spend resources on employees yet.
However, if you’re planning a major launch, you may be flooded with orders immediately. In this case, you must be prepared with the proper staff.
If you’re starting small, consider hiring a part-time employee. As you grow you may wish to access freelance help through referrals or even an online service.
What are your startup costs?
Even the smallest of businesses have startup costs. You may need computer equipment, special materials, or legal advice. You may have to pay a security deposit on a rental space, secure utilities, and purchase equipment. Where you access the funds to start your business is a major financial decision.
You may have your own personal savings to start your business. Maybe you continue to work at your “day job” while you get your business off the ground. (Just be mindful of potential conflicts of interest.)
Grants or government loans
There are small business grants and loans available. You can access federal programs through the Small Business Administration. You may even consider a business loan from a friend or family member. Just make sure to protect the personal relationship! People first, money second.
Securing a traditional bank loan is also an option to cover your startup costs. Expect to go through an application process. You’ll also likely need to have some collateral.
Crowdfunding is a relatively new option for gathering startup funds for your business. You may want to launch an online campaign that gathers donations.
What’s your backup plan
A good entrepreneur prepares for as many scenarios as possible – every business should have a backup plan. A backup plan may be something you go ahead and hammer out when you first create your business plan, or you might wait until you’ve gotten some momentum. Either way, it represents a financial decision, so it should be thought out carefully.
Develop a backup plan for every moving part of your business. What will you do if your sales projections aren’t near what you budgeted? What if you have a malfunction with your software? How will you continue operations if an employee quits without notice?
How much and what kind of insurance do you need?
Insurance may be one of the last things to come to mind when you’re launching your business, but going without it may be extremely risky.
Proper insurance can make the difference between staying in business when something goes wrong or shutting your doors if a problem arises.
At the very minimum, consider a Commercial General Liability Policy. It’s the most basic of commercial policies and can protect you from claims of property damage or injury.
Make your financial decisions carefully
Business owners have a lot to think about and many decisions to make – especially at the beginning. Make your financial decisions carefully, plan for the unexpected, insure yourself properly, and you’ll be off to a great start!
As you plan for 2023, feel free to reach out to any of our agents for expert advice.
I have a teenage son who swears listening to music helps him pay attention during school. After doing some research, I'm not so sure about that.
There are some workplace distractions that we all know torpedo our productivity.
We don’t need an article to tell us that social media and break room chatter hinder us from getting things done. But what about music? Afterall, that’s what we use to block out distractions and get in the zone. Do our favorite tunes actually make us productive or do they slow us down? It turns out that the answer to that question depends on why you listen, how easily you get bored, and what you’re playing.
The goal: avoid multitasking
The golden rule of music and productivity is that you must avoid multitasking at all costs. There’s no better way to hamstring your productivity, torpedo your IQ, and potentially damage your brain than by trying to divide your focus between two tasks.¹ So if you’re listening to music to drown out your talkative co-workers or that weird noise the AC makes, you’re on the right track. If you’re jamming out to tracks that make you think about highschool crushes and epic concerts, you might be doing yourself more harm than good.
Complexity and distraction
But it gets more complicated. Some people respond better to working while listening to music than others. A study discovered that boredom-prone individuals performed both simple and complex tasks better in silence, while the opposite was true for the less boredom-prone.² The researchers hypothesized that the jobs at hand were engaging enough to keep the easily bored occupied. The music was unnecessary external stimulation that dragged their attention away.
This means that there isn’t a one size fits all solution for using music for productivity. If you’re easily bored and distracted, you might want to avoid music while you work altogether. Noise cancelling headphones might come in handy, but be sure not to pump music through them. By contrast, more naturally focused individuals might find soft background music helps them zone out the noise and laser in on what they need to do.
What makes good focus music?
So let’s say you’re not distraction prone and you like working to some tunes. What music should you listen to? Despite what your uncle in the orchestra would have you believe, there isn’t a single best genre of music to stimulate your brain (sorry, Mozart). What you’re looking for is music with certain qualities.
First, find music that’s the right tempo. You’re shooting for around 60 beats per minute to minimize stress and promote focus. No dance music or break-neck metal! Second, avoid words. You’re probably listening to music in an attempt to cancel out conversation, not distract you with lyrics chock full of hidden meaning and symbolism that may catch your curiosity. Choose instrumental music over your favorite lyrical genius next time you need to work. A third option is to find something to listen to that’s not even music: nature sounds. Weirdly enough, trickling streams and the soft fall of rain are all random enough sounds that your brain doesn’t even bother with attempting pattern recognition. It’s a great way to mask office noise if music just isn’t working for you.
Ultimately, you’re looking for music (or nature sounds or white noise) that reduces diversions without becoming a diversion itself. Make this an opportunity to explore new kinds of music and try listening to them next time you need to focus on a project. And let me know if you find any hidden gems of slow classical music being performed in front of a gurgling mountain stream!
Whether you’re renting or you own your home, there are various insurance options you may want to consider.
Like any insurance, they’ll help provide financial coverage in the event of an unexpected disaster. There are also varying levels of insurance that you may choose.
There’s a general category known as “homeowner’s insurance”, which usually covers four categories: interior and exterior damage, damage to or loss of possessions on the property, and personal liability coverage that will help cover the cost of injuries sustained while on the property (such as if a guest slips and falls down the steps to the front door, your dog bites the mailman, your daughter's friend falls off of your balcony...you get the idea). Most policies will cover lodging and meals while the property is under re-construction due to a covered loss and not able to be inhabited for the duration.The damages section of the policy usually won’t cover acts of war or nature, the latter including things like volcanic eruptions or floods - check your policies exclusions!
For geographical areas prone to certain disasters, a separate, specialized insurance policy may need to be purchased in order to cover damages or loss caused by such disasters. For example, for areas that are low-lying and near rivers where frequent heavy storms occur (hello Boulder), general insurance may not cover damage to the property. Conversely, properties in mountainous areas are unlikely to need flood insurance but may need earthquake and/or landslide insurance if such events are more common there.
While homeowner insurance will cover damage to the property – which is a major concern for those with a financial stake in the property – renter’s insurance usually covers damage to and loss of possessions, and also offers coverage for personal liability for injuries sustained on the property. The landlord likely has an insurance policy on the property to help protect against financial loss in the event of physical damage, but their insurance unlikely will extend to the tenant’s possessions or guests’ injuries. Thus, those who rent the property will need to consider insurance policies for these events.
Which Policies to Choose
As with any insurance policy, there may be deductibles, liability limits, covered and noncovered events and assets, and premiums. Generally the higher the limits and the broader the group of included incidents or assets, the higher the premium will be.
Some issues to consider:
The bottom line is that you should shop around for the best rates and coverage. If you own multiple properties, try to find a company that allows claims to be attached to the property and not to your name -- that can make a big difference in premium. Each individual will need to find the best fit. Make sure you have coverage for any specific circumstances that may be common in your area. And most importantly, make sure you thoroughly read and understand your policies, and the situations they cover, and don’t cover.
Should you need further guidance, we provide free policy reviews.
What exactly is consumer debt? It’s “We the People” debt, as opposed to government or business debt.
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