Solving a Finance Problem

Dissect, Analyze, Solve

Something bothered me.

I was looking at my financial duties for 2010, staring as far out as December, when the imminence of what I have to pay struck me: huge life insurance premiums.

Do you have the thought that sometimes you may have bitten more than you can chew?

Years ago, when I bought those policies, business was good and was not yet bogged down by recession woes.  I felt I could do anything – be anything, buy anything.  My financial planner convinced me of the wisdom of obtaining life insurance (my second attempt at it).  For peace of mind, she said.  And I did have it.  I remember thinking while driving one day that my family will be okay if…  But now, that same thing that gave me peace of mind is shattering it.

What to do when the downward spiral of the economy continues?  Will the same thing that would reap my family huge benefits when I expire be instrumental to my demise?

I had to laugh.  That was a little too dramatic.

I put in a call to my financial planner to ask her about my options.  She agreed that I have to do a re-assessment of my current financial situation to find out if indeed I have a basis to panic.  Mere mental calculations will not tell me the cold hard facts, she said.  She asked me to write down my budget for the year (expenses), my bank accounts and their balances (and their purposes: investment, saving, fun, charity) and my goals for the year.  Having them side by side on paper will shed some light to my predicament.

Having talked to her, I was somewhat placated.  I guess the mind plays some of its tricks sometimes and one loses focus.  I am glad that my financial planner was there to tell me in not so many words: “You will be okay”.

While I am almost sure that I will not cop out of my life insurance policy (which, by the way, my financial planner does not recommend), I read up on the options:

Life Insurance Policies usually have a Non-Forfeiture Provision.  This provision means that if the policyholder can no longer pay, or does not intend to continue the payment of the premiums for the policy, and if the policy has been in force for at least three years, the cash value of the policy may be used for any of the following options:

• Cash Surrender Value – under this option, the policyholder surrenders the policy for its cash surrender value, less any indebtedness.  After such surrender, all insurance coverage under the policy ceases.

• Extended Term Insurance – under this option, the cash values of the policy will be used to purchase a term insurance for the same face amount but for a shorter period.

• Reduced paid-up – under this option, the cash value of the policy will be used to purchase a fully paid-up insurance, but for a smaller face amount.

Education (reading up or even google-ing), or asking an expert (or two) will put most worries and fears to rest.  It is okay to be paralyzed by it for a day or two but then you have to snap out of it and take action.  Most problems or worries, while probably not baseless, may be made light by the availability of options or solved by clarity of thought.

Choose action over inaction.  I am glad I did.

Be rich,

Issa

Article by Issa.   Art by D. Copyright 2010.
blog: YouWantToBeRich.com
email: issa@youwanttoberich.com

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