Although Hunter and his wife have a combined coverage of nearly $2 million in cash value, it was equally important that he create a long-term financial strategy for his children: Jasirah, Muhyideen, Maryum, Zulaikah, Inshirah, Layan, Umar, and Marwa.
While choosing a policy for children can be a difficult decision the Hunters felt it was the best choice. Each of his children has coverage worth $750,000 in cash value, which costs him about $700 a month. Although an expensive and unconventional choice it’s one that Hunter, who makes an annual salary of $250,000 a year, insists on. He says his children can tap into the policy’s cash value through the use of either a policy loan or by cancelling the policy and using the funds for retirement income, college tuition, a down payment on a home, or for emergencies.
“I now live with a level of security that I never had and it feels great,” says Hunter. “I am confident that if I were to leave this earth tomorrow, my goals could be accomplished and my family will be secure.”
Hunter did extensive research before he found a plan suitable for his family. Here are some tips to keep in mind.
• Create a policy tailored for you. Some insurance providers allow policyholders to add “riders”—an additional set of terms and conditions that “rides on” the basic package. For example, the Hunters added a disability waiver to ensure that all future premiums would be waived and the policy would keep them insured if they were to become totally disabled.
• Compare policies. “Insurance policies look alike from the outside but there are little features that make them different,” says Hunter. Ask yourself, “What happens if I get sick?” “If I make a withdrawal and repay the policy back by the end of the year will I suffer a penalty?” “Will I still get dividends for the whole year even after the withdrawal?” Hunter says, “Some stuff is obvious, but when you compare apples to apples you have to split them down the middle and see which one has a little bit of rot in it.”
• Estimate your insurance needs. “We had to determine how much we could afford and how much we needed for either of us to maintain our lifestyle after the other spouse was gone,” explains Hunter. This calculation included Hunter’s salary for the next three to five years, funeral expenses, the cost of operating his business, and overall financial obligations such as the mortgage, debt, estate taxes, etc. (See “The Meaning of Life Insurance,” Moneywise, September 2010).