Life insurance: Most people are familiar with the concept, but it doesn't make them any more eager to discuss it.
"I've had many situations when people are averse to buying life insurance," said Randall at Financial Enlightment. He stressed the obvious question: What if something happens to you, and your family is left without an income stream?
"Life insurance isn't the problem—it's the solution for the problem," he said.
Though people have various options—including term, universal, whole life—getting the right amount of insurance is what's most important, he said.
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"I've delivered many death benefit checks, and I've never ever had a beneficiary ask what type of insurance it was," Randall said. "They always ask, 'How much is the check?' "
What type you choose has to do with factors such as cash flow, discretionary income, age and financial objectives, he said. Over the past 10 years, term rates have become so compelling that people buy that most of the time.
In addition to the death benefit, life insurance coverage can be used as a retirement savings vehicle. Certain policies can build up a cash value that can be withdrawn tax-free, although some advisors warn against it.
"Life insurance should be used only to cover catastrophic [situations]—you start getting in trouble when you start using it for retirement," Riashi said, adding that the investment costs of doing that are often high and the choice of funds is limited.
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Maurer added that the tax advantages with life insurance are not as good as those with an individual retirement account, so an investor should max out other qualified retirement accounts before investing inside life insurance.
Insurance isn't used as much in estate-tax planning, he said.
When the estate tax was in flux, people frequently used insurance to cover potentially large liabilities when they died. According to experts, now that the estate-tax exemption is set at an inflation-adjusted $5 million, it's not so necessary for people with smaller estates.
By the numbers:
- 30 percent of American households have no life insurance. (LIMRA)
- About 100 million workers are without private disability income insurance. (Social Security Administration)
- 68 percent of adult Americans have no savings earmarked for an emergency. (U.S. Federal Reserve Board)
- 33 percent of consumers believe they do not have enough life insurance (LIFE 2013 Insurance Barometer Study)
- 70% of people over age 65 will require some long-term care at some point in their lives. (U.S. Department of Health and Human Services)
- The average private pay cost of a nursing home stay in 2012 was $88,000 per year. It exceeded $100,000 in 10 states. (AARP Public Policy Institute)