This year has been one of the more turbulent times in recent history. The pandemic has taken a toll on people’s health and the economy. We’ve all felt the impact.

It’s natural, when so much feels uncertain, to wonder if your family's finances are protected. Fortunately, that’s what financial planning is all about. A good plan places equal emphasis on growing wealth and protecting it from life’s uncertainties. From life insurance to an emergency fund, there are many ways to make sure your family’s finances are protected. But have you considered them all?

Take the quiz below to see how well versed you are regarding key strategies to protect your family’s finances.

THE QUESTIONS

1. In general, the death benefit from a term or permanent life insurance policy is tax free?

A. True

B. False

2. What are some ways an estate plan can potentially protect your family?

A. May help protect your estate from creditor claims

B. May reduce or eliminate certain taxes

C. May designate who will take care of your children

D. All of the above

3. Which of the following are key life events in which you may want to revisit your financial plan to ensure it’s aligned with your family’s needs?

A. Birth of a child

B. The stock market had a bad week

C. Starting a business

D. You just got a big promotion

4. When it comes to planning for the unexpected, how much should you tuck away into an emergency fund to cover a surprise expense?

A. A week’s worth of expenses

B. 3 to 6 months’ worth of expenses

C. A year’s worth of expenses

D. 5 years’ worth of expenses

5. When the stock market gets volatile and investors panic, what is often a the best action to take to avoid long-term financial damage?

A. Sell your winners, go to cash and wait for the market to recover

B. Rotate your investments into assets with momentum

C. Put retirement funds into alternative assets like real estate

D. Stick to your plan, and potentially do nothing at all

6. If you get hurt and can’t work, the disability insurance you receive through your employer will replace all your lost income?

A. True

B. False

7. One way to enhance your family’s financial security is to build streams of guaranteed retirement income into your long-term financial plan. Which of the following can help provide guaranteed income in retirement?

A. Annuities

B. Social Security

C. Roth IRA

D. Whole life insurance

8. How does a whole life insurance policy enhance long-term financial security?

A. Lifetime death benefit

B. Guaranteed accumulated value (also known as cash value) growth

C. Potential for annual dividend payments

D. All of the above

9. Which of the following is not a benefit of purchasing an individual disability insurance policy in addition to, or in lieu of, your employer’s group disability plan?

A. It’s less expensive

B. An individual policy is portable from one job to the next

C. You can potentially cover all your income, not just a portion

D. An individual disability policy benefit is typically tax free

10. In terms of financial security, what is the most valuable asset for you and your family?

A. Your home

B. Your whole life insurance policy

C. Your investments

D. Your lifetime income

THE ANSWERS

1. In general, the death benefit from a term or permanent life insurance policy is tax free?

A. When your family receives a death benefit it is typically tax free.

2. What are some ways an estate plan can help your family?

D. It’s all of this and more. An estate plan is a critical part of financial planning. Above all, it ensures your wishes are executed smoothly, tax efficiently and exactly as you intend them to be. And while money is one consideration, an estate plan also outlines who will take care of your children if you pass away — if you haven’t designated a guardian, a judge will. Broadly speaking, without an estate plan you leave critical decisions that impact your family and its finances to the courts. Interested in learning more? Check out our estate planning 101 article to get started.

3. Which of the following are key life events in which you may want to revisit your financial plan to ensure it’s aligned with your family’s needs?

A, C and D. While a bad week on the market can breed uncertainty, your financial plan doesn’t change from week to week; rather, it’s all about the long term (think decades). So, a bad week on the market isn’t a reason to rejigger your plan. However, the birth of a child, starting a business and a big job promotion are significant life events that may reshape your priorities. You may need more insurance for your growing family. Starting a business may require a loan or tapping into funds to get your enterprise started. That promotion may allow you to accelerate debt repayment, your retirement contribution goals or both.

4. When it comes to planning for the unexpected, how much should you tuck away into an emergency fund to cover a surprise expense?

B. Generally, we recommend tucking away enough to cover 3 to 6 months’ worth of expenses in an emergency fund. Once you have that emergency fund built up, you can stop adding to it and instead channel that cash to other financial goals.

5. When the stock market gets volatile and investors panic, what is often the best action to take to avoid long-term financial damage?

D. When markets are tumultuous or panicky, that’s often when investors tend to make their biggest mistakes. During heightened volatility, it’s generally a good idea to sit back, relax and trust the plan.

6. If you get hurt and can’t work, the disability insurance you receive through your employer will replace all your lost income?

B. Your employer’s group disability insurance, in most cases, your benefit will be about 50 to 60 percent of your paycheck (and the benefit will be taxed). Your income-earning potential is your greatest asset and key to your financial security, and a personal disability policy can help close that gap.

7. One way to enhance your family’s financial security is to build streams of guaranteed retirement income into your long-term financial plan. Which of the following can help provide guaranteed income in retirement?

A and B. Annuities, Social Security can serve as guaranteed sources of income in retirement that are shielded from the ups and downs of the market. Both annuities and Social Security are guaranteed regular payments for life. Accumulated value (also known as cash value) that has built up over time in a whole life insurance policy can also be accessed as supplemental income (though it shouldn’t be a primary income source). It’s important to understand that utilizing the accumulated value through policy loans, surrenders, or cash withdrawals will reduce the death benefit; and may necessitate greater outlay than anticipated and/or result in an unexpected taxable event.

8. How does a whole life insurance policy enhance long-term financial security?

D. All of the above. A whole life insurance policy is an excellent means to improve your family’s financial security. The death benefit is guaranteed for life, over time it builds accumulated value that you can utilize for any financial need and many policies pay annual dividends (though they aren’t guaranteed).

9. Which of the following is not a benefit of purchasing an individual disability insurance policy in addition to, or in lieu of, your employer’s group disability plan?

A. A personal disability insurance policy is portable from one job to the next. The benefit is also generally tax free (a policy paid for by your employer may not be, however). Purchasing a personal policy can also stack on top of your group plan to cover a higher percentage of your income. However, a personal disability policy will typically be a little more expensive than a group policy.

10. In terms of financial security, what is the most valuable asset for you and your family?

D. Over your lifetime, you’re likely to earn a lot of money. That makes your ability to work and earn that money your most valuable asset. It’s why disability insurance is such an important part of a financial plan. If something prevents you from earning an income (which is what will fund the goals in your plan), disability insurance will help you keep the plan on track. And when you have a family or others that depend on you, the death benefit of life insurance is equally as important.

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