Integrated Risk Management: How Life Insurance Fits into the Financial Planning Picture.

• Author: Wright, Leonard C.

Delivering financial planning services and helping to protect your clients' best interest includes risk management planning.

Smoothing Out Life's Bumps in the Road Life insurance options protect our clients when the inevitable bumps in the road occur. The stability of whole life insurance tempers the volatility in the capital markets and provides resources in times of need and income as clients age.

Fee-only planners generally avoid risk management planning due to perceived conflicts that are present when accepting a commission. Conflicts always exist regardless of the compensation structure. It is common to hear from fee-only advisors that implemented life insurance or annuity strategies result in lower assets under management and lower fee income a similar conflict.

The insurance profession can have a stigma due to what CPAs see over the long run, such as when policies set up for estate planning purposes are in danger of lapsing. As CPAs, we can provide significant protection through a bit of knowledge, and a client's best interest is served through gaining working knowledge around risk management products.

A couple of tips to consider:

* Request a specimen policy so the clauses of the file insurance policy are clear.

* Depending on the premiums, consulting a fee-only insurance advisor may be worthwhile. Integrated financial planning should include a deep understanding of risk-based products, even if it reduces assets under management. The lifecycle of life insurance is broad.

Life Insurance Lifecycle

When we are young, term, universal life, variable universal life and whole life provide the following benefits:

During life:

* When coupled with a waiver of premium rider at some companies, should total disability occur, term insurance premiums are paid by the insurance company and term insurance can be converted to whole life insurance, where the life insurance company will pay the premiums under the proper contract.

* Whole life values can be accessed through borrowing.

* Children's policies can carry additional purchase benefits that may allow other insurance purchases without evidence of insurability. A child with any ailment that renders the child uninsurable may obtain more than $1 million of additional coverage without additional underwriting.

When coupled with a waiver of premium, and total disability, the child may receive premiums paid by the insurance company that adds up to significant cash value by the lime retirement is reached.

At death:

* Tax-free...