Welcome to the 4Thought Financial Group ‘Financial Planning Idea for the Day’ video series, with our CFO and host, Martin Levine. This week, Levine shares tips for purchasing life insurance, as this can be an important part of your overall financial plan.
4Thought Financial Group CFO Martin Levine recently sat down with a client who was looking to buy life insurance, and in this brief video, he explains how and why he advised the man to go with a mutual company.
“I met with a 31-year-old male who is married and has two young children,” Levine begins. “He needs life insurance. He wanted me to call him regarding life insurance.”
The client explained to Levine that he had a limited budget to work with, so 4Thought’s chief financial officer immediately knew the direction to guide him.
“The most important thing, besides to maximize the amount of term life insurance that you can get right now, based on your income, is to take a look at the companies that we call ‘mutual companies,’” he explains. “These are companies that are owned by policyholders, and they’re not owned by stockholders. So those companies are where you want to buy the life insurance from, because the long-term value, when you want permanent insurance, will be with the mutual companies.”
Filling unique needs for insurance is essentially what mutual companies do best, as some may offer multiple lines of coverage (life, health, property and casualty), while others may focus on more specialized markets, where the concentration is on more difficult or higher-risk accounts. It’s important to note that mutual companies only serve the needs of the policyholders, or “members,” as they are also called. There are no stockholders involved with mutual companies.
“So that’s the lesson, is to go with a mutual company that’s owned by the policyholders. Long-term value will be there.”
“Permanent” life insurance is the term used for a life insurance plan that doesn’t expire, typically combining a death benefit with a savings plan.
Levine stresses the takeaway from this week’s installment of ‘Financial Planning Idea for the Day’ is simple: The policyholder is front and center with a mutual life insurance company, and the focus is always on long-term value.
“So that’s the lesson, is to go with a mutual company that’s owned by the policyholders,” he concludes. “Long-term value will be there.”
Check back for the 4Thought Financial Group ‘Financial Planning Idea for the Day’ every week, as Martin Levine tackles frequently asked questions from clients spanning a wide range of topics, such as avoiding high investment fees, macro versus micro investment strategies, breaking down retainer fees, and what to do with older life insurance policies, among many others.
4Thought Financial Group is a Syosset, New York-based provider of Retainer Fee-Based Wealth Management services specializing in delivering the most effective financial planning solutions aligned with clients' lifelong goals.