Activities in life often require some compromising of principles. For example, in the past no candid follower of college football was without some discomfort when he or she watched a bunch of unpaid kids (at least prior to existing NIL licensing opportunities) generate millions in revenue for an athletic program, all the time having to keep fingers crossed that they didn’t blow out a knee before getting a shot at the Big Show and its big compensation packages.
And what about inflation? After a 40-year low-level-lull, the rate jumped to 7% in 2021 and is projected to be well over 8% for 2022.
And there is no end in sight as the federal government continues to print and spend money like a drunken sailor.
There’s a joke about the politician who claimed inflation was our friend because . . . “it will eventually make us all millionaires!” True but, as we all know, probably while causing an actual reduction in our real wealth.
So, we don’t like inflation, but as life insurance advisors we probably tend toward the college-football fans’ mushy-middle moral ground when we consider it provides at least three increased opportunities for more and larger sales.
Most times carriers are reluctant to approve any portion of applied-for coverage based on anticipated future need. One exception is insurance to fund future death tax liabilities. Guidelines allow calculation of future need based on current net worth increased for over a reasonable number of years at a reasonable rate of growth. Since a reasonable assumed growth is tied to inflation (remember, we’ll all be millionaires!) it can be more aggressive resulting in a greater future death benefit need.
Inflation erodes the effectiveness of static death benefit levels in a policy. It may be time to consider more, possibly in the form of a entire, more effective policy.
Often regular policy reviews don’t take place as often enough. So coverage exams prompted by inflation concerns may uncover additional or increased estate or business planning needs for which current coverage is insufficient or non-existent.
One advisor told us she recently explained to her client, “When I was young the tooth fairy left enough money that I could buy a new doll. Today the doll would cost me ten teeth. You need more coverage!” Another advisor had a son who asked him for ten dollars. He replied, “Twenty dollars! What do you need fifty dollars for?” And we know of one client who had to close his balloon store because of the cost of inflation.
We will keep you supplied with more inflation jokes since demand has increased after a period of low interest! Otherwise call to discuss any tax, or business and estate planning questions you may have regarding your casework with CPS at 706-354-0401 or email@example.com.
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