fi nancialforum Life Insurance F

Insurance Options MOAA members can take advantage of a variety of insurance products. For more infor- mation, visit www.moaa .org/moaainsurance or call (800) 247-2192.

48 MILITARY OFFICER JULY 2015

Like many fi nancial products, life insurance can be complex. Make sure you understand your policy, why you have it, and how it works. By Lt. Col. Shane Ostrom, USAF (Ret), CFP®

Financial issues easily can get com- plicated. And when they do, the added complexity and stress can cause us grief. Take, for example, insurance. It’s pretty simple on the surface. It’s protection against a risk you can’t or don’t want to aff ord. Your car gets totaled. Insurance covers a new one. Your house burns down. Ditto. You need home health care. There’s long term care insurance. You probably wouldn’t buy insurance if you could aff ord to cover these costs out of pocket. After death, your family needs assets to continue their lifestyle or pay taxes and fees to settle an estate. Where will these assets come from? Maybe you have assets on hand. Perhaps a spouse has per- sonal means. You might have family ready to step in. Or you have life insurance. Warren Buff ett has a way of explain- ing the complex in simple terms. When it comes to fi nancial situations, he says, “Risk comes from not understanding what you are doing.” Life insurance products can be very confusing, so it’s important to understand the details. Who isn’t confused? There are so

many types and names of life insurance — term, annual renewable term, level term, decreasing term, whole life, perma- nent life, universal life, variable universal life, variable life, etcetera. On top of this, life insurance can be used for more than just a death benefi t. Plus, beyond life in- surance, there are annuity products with insurance features. It’s so complicated.

After I conduct investment classes, attendees often hang around to talk to me about their investment issues. Some- times during the discussions, I real- ize their investment is a life insurance product. When I mention this to them and ask their reason for purchasing a life insurance product as an investment vehicle, they usually are not aware of the insurance situation or they can’t explain the investment benefi ts of the product or why they purchased it. Don’t get me wrong. I’m not implying

there is a problem with the type of life insurance product discussed above. There could be valid reasons to have an insur- ance product as an investment vehicle. My point is complexity and risk come from not understanding the tool, why you have the tool, and how it works to achieve your objective. To keep your fi nancial life simple and

prevent complications, understand your fi nancial objectives. Manage by objective. Separate your fi nancial life into your objec- tives: liquid emergency savings, insurance products, long-term investments, retire- ment accounts, college savings, etcetera. Pick the tools that best address your sepa- rate objectives in the simplest and most cost-effi cient manner possible.

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— Lt. Col. Shane Ostrom, USAF (Ret), is a CFP® and benefi ts information expert at MOAA. Visit www.moaa.org/fi nancialcenter for other re- sources. Email specifi c benefi t and fi nance inqui- ries to beninfo@moaa.org.

PHOTO: SEAN SHANAHAN