Faruq Hunter, an entrepreneur with a growing business and family, bought life insurance partly because of a hard lesson he learned from his father, who left behind $40,000 in debt when he died.
Hunter admires the fact that his father always helped people in need. He was a man who invested in his community and in his family’s “spiritual and mental banks,†but unfortunately “the financial bank remained empty,†says Hunter who was 27 when his father died. “Out of all the money made and good work that my father had done throughout his life, there wasn’t even enough funds available to put him in the ground.
Estate and insurance planning is not just for the wealthy or the elderly. It is for anyone who wants control of where his or her assets end up. But 35 million households have no life insurance coverage, according to a 2010 Trends in Life Insurance Ownership study conducted by research firm LIMRA. With individual life insurance at a 50-year low, four in 10 U.S. households with children would have immediate trouble paying bills if the main breadwinner died today.
As the eldest son of 14 children, Hunter–now the father of eight–is making sure he leaves behind not just enough money to cover burial expenses but an inheritance that will expand over generations to come.
The 34-year-old is principal and executive vice president of International Strategies and Operations at GeniusCo, an Atlanta-based IT management and services company that made $8 million in revenues in 2009. When it was time to choose a life insurance policy it was important that he and his wife, Aliyyah, 36, purchase a plan with adequate coverage that was also affordable.
Hunter identified four main items that the policy should contain. His first objective was to estimate the family’s life insurance needs. “We had to determine how much we could afford and how much we would need for either of us to maintain our lifestyle after the other spouse was gone,†he explains. Hunter factored in three years of his earnings, figured out how much he would owe if he died tomorrow, and included his wife’s and children’s living expenses.
Next, Hunter checked the longevity and consistency of life insurance companies, visiting their websites and paying special attention to each company’s board of directors and top management. He also investigated whether the insurer consistently paid out dividends.
Hunter then gauged the flexibility of several plans. He was interested in a plan that would allow him to borrow against it before retirement age without incurring fees and penalties. Lastly, he searched for a policy that would protect him if he were injured on the job. For example, some insurers offer a disability waiver premium, which ensures that insurance coverage is not lost when the policy owner is unable to pay premiums due to a total disability.
All the research guided the Hunters to a 15-year custom whole life insurance policy with New York Life Insurance. Here’s how it works. A portion of the premium goes into an investment account and accrues cash value allowing the policyholder to invest in bonds, money market accounts, and stocks. You can also borrow against the cash value of your policy.
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