Strickland Risk Advisors
Nate started his career in the insurance and financial services industry in 2015 as a comprehensive financial planner. After gaining that experience he decided to get into the “family trade” and become an insurance specialist instead of a financial generalist. As a fourth generation funeral service and life insurance agent he seeks to be an advocate for the life insurance industry.
Nate has found a niche working with small business pension plans, life insurance, and funeral expense planning.
As a Texas A&M graduate he supports Aggie Athletics and the Corps of Cadets. He enjoys spending time with his wife Mara and his sons Lucas, Patrick, and Simon. Nate also likes following Astros baseball.
Nate is licensed in Life, Accident, Health and HMO and General Lines Property & Casualty by the Texas Department of Insurance.
BA, Administration, Texas A&M University
Graduate Courses, Finance, Texas A&M University-Commerce
This website profile is provided for informational purposes only and should not be considered tax or legal advice. You should consult your tax, legal, or accounting professional regarding your individual situation. The website profile should not be considered financial planning or investment advice.
1. With the investment and financial planning industry's relentess and almost propagandic effort to push every dollar into qualified retirement plans I find that most people are woefully underinsured. This goes for insurance that can have a huge impact on your family's financial future including life, disability, critical illness, and liability insurance. Insuring against these events protects your family's dignity in the event of death, cancer, heart disease or lawsuits. However, it looks like you have taken responsibility and have several life insurance programs in force. What are those amounts? Whole life insurance can be great tool for your family especially to cover your final expenses or for an inheritance. By purchasing it younger your coverage will be more affordable over your lifetime especially when your term life insurance expires or becomes annually renewable term with premium increases. It only costs more to insure you as you age.
2. As a single parent you should STRONGLY consider looking at some other insurances such as disability and critical illness. Since you are a one income household your family's financial future is in a much riskier position than a household with dual incomes. Really consider utilizing your dollars to both insure and save for your retirement.
When you say present value are you referring to the cash value or the death benefit? When you say estate are you referring to a trust or an individual?
The way life insurance works is that any policy loans and interest due are subtracted from the death benefit when it pays out. For example, If a client had a loan out for $100,000 on a life insurance policy and the death benefit was $500,000 then if the client passed away the insurance company would pay out $400,000 to the beneficiary. This is a general concept but how the life insurane policy is structured with regard to ownership is crucial information with regard to taxation. Always consult a tax professional
I'm not exactly clear on the terminology you are using and so I have to be careful that I don't mislead you. Trust owned life insurance can be complex so you should consult with an attorney but I am not sure if that is what you are referring to in this case.
Great question. I'm sorry you have had a bad experience with life insurance salesman.
I'm going to have a contrarian opinion to other professionals on this board. I believe you should be well informed.
The first response is that at 27, I'm sure you are figuring out that we are all in sales. Selling ourselves to our employers to keep our jobs, starting a small business, influencing our spouses to let us watch what we want on TV, or even selling life insurance. So just because someone is in sales, does not mean they cannot be a great resources for you. Sales also include the high and mighty, "I'm not a salesman", fee-only financial service providers. To say otherwise is to not be honest. The fact is, as a capitalistic society, we are all competing for your dollar so please don't let the self-proclaimed non salesman distort reality for you. Otherwise, who would buy their fee-only service if they did not try to sell you the benefits of their services? And just for the record, I have experience doing all types of financial services to include fee-only. It is not a good value proposition for the consumer in my opinion. To make a plan profitable planners have to charge thousands of dollars per case or charge hundreds per hour to give you a binder of spreadsheets that most likely will be meaningless in 2 years because your situation has changed. And guess what? You will have to spend more to update your plan or pay a retainer. Now let me ask you, is that the best use of your capital? I mean, someone has to pay the CFP fees so why not you?
The next response is that I am proud to be a 4th generation life insurance professional. My family lineage has helped thousands upon thousands of people at their time of need during some of the darkest hours of their lives (death of a loved one). So I have a tremendous appreciation and respect for what life insurance can mean for a family and I am not embarrassed or ashamed of what I do professionally.
The next thing is that I agree with some of the posters that whole life is not for every person. It is really for individuals that are financially and professionally established that have an adequate income. At 27 years old, it may be premature for you to buy a whole life policy and it might be better for you to buy a longer-term policy with a feature to convert to whole life in the future. I prefer to recommend it when clients are in their 30s and 40s, generally speaking.
Now, to get back to your specific question, here are some (but not all) reasons why whole life insurance can be a great purchase for you:
1. Non-correlated asset class
Whole life insurance has two components that are not correlated with the market: a fixed interest rate and the timing of your death. Is that fair? Regardless of what the markets are doing at any one point in time, you are contractually guaranteed a fixed rate of return and your family will have permanent access to capital when you die. Which last time I checked we all die, right? So yes, you can theoretically earn more in the market however, you are subjecting yourself to unknown market risks and also risking your own insurability in the future with just a term product solution. So although it is not a sexy investment product, there are benefits to owning it as an asset class.
2. Risk Management
If you were to become permanently or temporarily disabled, will your employer fund your 401(k)? Roth IRA? IRA? Chances are they will not be funded. In the case of whole life insurance, there are features available that will make the insurance company responsible for paying your premiums while you are on disability. Whole life is also (depending on the state in which you live) protected from creditors and lawsuits if you are found liable for something you did professionally or personally (ie auto accident).
3. Tax treatment
Most posters have already mentioned that the tax treatment of cash value life insurance is favorable in this country including a tax deferral on cash value and an income tax free benefit to your beneficiaries.
4. Contract Backed By Financially Strong Institutions
Life insurance companies are some of the strongest financial institutions in the world. Many have high ratings from Moody's and Standard and Poor and I recommend buying from a highly rated and conservatively managed company.
5. Unknown time of death
You mentioned that you plan on not needing the insurance when you are older. Many posters have also mentioned this. I hate to ask you, but do you know the hour of your death? Any reasonable person will say that they do not. So therefore, if you do not know when you are going to die, then how do you know that your surviving family members will not need the money when you die? Having the protection in place for your family and loved ones to help with expenses and maintaining their standard of living when you die is not a poor financial choice as others on this board would lead you to believe. After all, life insurance is for the living not the dead.
Finally, Whole life insurance comes in many different shapes and sizes, including limited pay policies designed for cash value or policies designed for longer protection and not for cash accumulation. It depends on the strategy you are looking for. To make sure you are selecting the right policies, ask more questions and give it a fair chance and comparison to include non rate of return factors like risk management and liability protection.
Seperating insurance and investments is one philosophy in the financial services world. (Buy Term Invest the Difference) There are pros and cons to this approach. I find it becoming more prevalent amongst financial pros and I'd argue it is not in the clients best interest to take such an ideological approach.
The smarter choice is relative to your situation. Can't really comment since I don't have all the facts but here are some thoughts to consider:
My concern is to make sure you have adequate life insurance first. Do you want a life long permanent death benefit? If so, keep it.
How long have you had the policy? Do you have anyone else that would or could depend on you financially now or in the future? Maybe not ,maybe so, a lot will change in your life.
You are really young (and probably are looking to invest in higher yielding investments?) but this policy might be one to hold on to long term. One of the biggest cons of not sticking with permanent insurance is that quite frankly you do not know what the future holds. It may be well intentioned that you will not need insurance in the future because you have no debt or have a lot in your retirement accounts but I'd argue it is worth keeping as a tool for you to have. Your family situation may change.
You don't know if you are going to live to 30 or 100. You don't know how you will die. Your death might accompany high medical or other costs prior to death that you may leave others responsbile for. Your financial situation may not be that strong at the time of death and your family would not be financial secure without having the insurance payout. A lot to consider here that shouldn't be taken lightly . As the saying goes: It's better to have it and not need it than to need it and not have it.
Your health my change. So by choosing to not keep the permanent life insurance now could mean that you may no longer be able to buy insurance in the future.
And just a side note: If you are dead set on surrendering it, you might want to look into a 1035 exchange tax free to an annuity if you are looking to beef up retirement savings. And also make sure you have other insurance in place before surrendering it.
First of all, congrats on the big engagement and decision to purcahse a home. As a side note you should carefeully consider your mortgage options carefully to allow for ample room in your monthly cashflow for things like insurance and home repairs.
Remember, your risk of death is 100%...I don't know of any person that got out of here alive.
It is perfectly prudent to buy permanent life insurance at your age and don't let anyone tell you otherwise. A good advisor, whether a fiduciary or not, (whether fee only or not), should be addressing this with you. No one has a crystal ball into the future including myself (and including a fee only advisor) and to not have any permanent life insurance in place ever is not prudent. It's even foolish if you have a family in my opinion. You do not know your time of death and therefore it is impossible to predict your financial situation or obligations at the time of your death. In just the past 10 years how much has your financial situation changed? Now imagine the changes in 40, 50, 60 years? For a relatively small premium at your age you can hedge against this and also build some wealth (although much more slowly and conservatively) in the process. But thats ok, you want safe money here.
Remember, life insurance should be financial certainty for an uncertain future.
The main question becomes which type and what amount? That is hard to say as there are many different flavors of permanent life including indexed universal life. As a general rule in my practice I do not utilize IUL very often (in fact almost never). IUL is extremely complex. Have you looked at the product guide for these things? Between index selection options, caps, participation rates, floors, and the fact that the insurer can change some of these items makes IUL a beast with many moving parts. They are generally principal protected products meaning you will not be directly invested in the financial markets so you will not experience market loss. Is that what you want to achieve here?
So to answer your question it is not necessarily a bad thing to be considering life insurance. I think you might find much simpler products in the market that could fit your situation more pragmatically. Also, term life insurance could also be appropriate once your life insurance need becomes much larger if you were to have children.