LIFE INSURANCE

Chances are, you need life insurance

Life insurance is a simple answer to a very difficult question: How will my family manage financially when I die? It’s a subject no one really wants to think about. But if someone depends on you financially, it’s one you cannot avoid.

There are many types of life insurance, but for all of them the bottom line is the same: They pay cash to your family after you die, allowing loved ones to remain financially secure. Life insurance payments can be used to cover daily living expenses, mortgage payments, outstanding loans, college tuition and other essential expenses. And, importantly, the death-benefit proceeds of a life insurance policy are almost never subject to federal income taxes.

Insurance Proceeds Can Fund Many Types of Expenses:

Immediate Expenses:

  • Funeral costs
  • Car loans
  • Estate settlement costs
  • Uncovered medical expenses
  • Credit card debt
  • Mortgage
  • Taxes

Ongoing Expenses:

  • Food
  • Transportation
  • Utilities
  • Housing
  • Health care
  • Clothing
  • Insurance

Future Expenses:

  • College
  • Retirement

What kind should you buy?

Term Insurance

Term life insurance provides protection for a specific period of time—the “term”—and is designed for temporary circumstances. It makes the most sense when your need for coverage will disappear at some point, such as when your children graduate from college or when a debt is paid off.

The most common term policies provide coverage for 20 years, but they can run the gamut from one-year policies to terms of 30 years or even longer. In some cases, a term policy may also be converted to a permanent policy. Typically, term insurance offers the greatest amount of coverage for the lowest initial premium and is a good choice for young families on a
tight budget.

Permanent Insurance

Permanent insurance offers lifelong protection, and you can accumulate cash value on a tax-deferred basis. This cash account can be used for a variety of purposes, from helping you out of a tight financial spot, to providing funds to take advantage of an opportunity, to supplementing your retirement income.

Permanent insurance falls into four main categories. Whole life is the simplest and most common option. Premiums remain the same for life, and the death benefit and rate of return on your cash value are guaranteed.

With variable life, you can seek potentially better returns by allocating your fixed premiums among investment subaccounts, typically comprised of stocks and bonds.

Universal life offers the flexibility of varying the amount of your premium payments. It also offers the certainty of a guaranteed minimum death benefit as long as your premiums are sufficient to sustain it. If you do not maintain those minimum premiums, your death benefit can be reduced.

Variable universal life premium payments are also adjustable, subject to the minimum needed to keep the policy in force, and you can allocate them among investment sub accounts that offer varying degrees of risk and reward.

DISABILITY INSURANCE:

Insuring your Most Valuable Asset…You!

Your most important asset is not your home, your car, your jewelry or other possessions. It’s your ability to earn a living. Think about it: All of your plans for the future—from buying a home to putting your kids through college to building a retirement nest egg—are based on the assumption you will continue to earn a paycheck until you retire. But what would happen if those paychecks stopped? That’s where disability insurance comes in.

It provides an income to you and your family if you are unable to work because of illness or injury.

Understanding the Risk of Disability

Who needs disability insurance? Just about anyone who has a job. The possibility of a disabling illness or injury may seem remote, but statistics paint a different picture.Of today’s 20 year-olds, one in four will become disabled at some point in their career, according to the Social Security Administration.

How Much is Enough?

Will you be able to maintain your current standard of living if you become disabled? The easiest way to answer this question is to add up your monthly living expenses and compare them with the income you could expect from your existing disability coverage, plus any income you count on from other sources, such as personal savings. If your income from all sources won’t be enough to support you and your family, consider buying additional disability insurance—either through work or on your own—to make up the difference.

1 IN 4 OF TODAY’S 20-YEAR-OLDS WILL BECOME DISABLED AT SOME POINT DURING THEIR CAREER

While it’s true that people in professions like farming, law enforcement and construction face greater risks, the odds of suffering a long-term disability are high for all workers because illness—not accidents—account for 90 percent of disabilities that keep people out of work.

Your paycheck could stop arriving just as an illness or injury brings significant expenses for medical bills, physical rehabilitation or the cost of modifying your home to accommodate medical equipment. Missed mortgage payments could put ownership of your home in jeopardy. Falling behind on credit card and other bills could mean burdensome late fees and escalating finance charges. In fact, disabilities have historically caused nearly half of all mortgage foreclosures and a significant number of personal bankruptcies.

LONG TERM CARE INSURANCE:

Who will care for you when you can’t care for yourself?

Chances are the day will come when you won’t be able to manage on your own. In fact, almost 70 percent of those over age 65 will require some form of long-term care during their lives.

Long-term care includes all the assistance you would need with daily living tasks if a chronic illness or disability leaves you unable to care for yourself for an extended period of time. It could be care in your own home or in a specialized facility.

4 Reasons to Consider Long Term Care Insurance:

  1. Gets you the care you need in the setting of your choice.
  2. Helps you maintain your independence.
  3. Can help protect your retirement assets.
  4. Helps relieve financial and caregiving pressure on your family.

Long-term care insurance puts you in control

Long-term care insurance helps make sure that you’ll have access to high quality care should you ever need it. Using insurance to pay for care also means that you won’t need to choose between getting the assistance you need and spending down your life’s savings. In short, long-term care insurance puts you in control.

Care options that may be available to you

Many people think their private health insurance or Medicare would pay, but that’s typically not true. Health insurance really only pays for doctor and hospital bills. Medicare will cover skilled care for periods up to 100 days, but only if certain requirements are met. If you need care over an extended period of time, you’d have to spend down your assets before Medicaid would kick in, and then, you’d have less choice about the care you receive.

Others assume their loved ones would provide the care they may someday need, but that’s an imperfect plan. Many don’t recognize the significant negative impact caregiving could have on the caregiver, who often suffers emotionally and financially as a direct result of their caregiving
responsibilities. If your plan is to turn to your family, is that what’s really best for you and them?

When should you buy?

It’s true that most long-term care insurance claims are made when people reach their golden years, but there’s a misconception that you should wait until you’re approaching
retirement to buy a policy. Waiting too long to purchase a policy can be very costly. Because rates are based on age and health, it’s best to start shopping for a policy when you’re
young and healthy.

A good time to purchase is when you’re in your 40s or 50s. You can certainly buy a policy when you’re in your 60s or even older, but expect to pay considerably more. Plus, if you wait too long and develop a condition that may require long term care, you could become uninsurable.

Rates are based on age and health. The younger you are, the lower your premiums generally will be.

RETIREMENT PLANNING:

What is it?

Determining your retirement income requirements is a process that helps you identify your retirement planning needs based on your desired standard of living and the resources you’ll have available. Today, you can typically no longer rely on Social Security benefits and a company pension check to fulfill all your retirement income needs. Social Security benefits will probably satisfy only a fraction of your overall retirement income needs, and generous company pensions have largely been replaced in many cases with employer-sponsored retirement plans that are funded largely with employee dollars.

A successful and rewarding retirement requires you to plan ahead in order to help ensure that you have sufficient retirement income to last you for your entire retirement. Determining your retirement income needs requires a discussion of the various stages of retirement planning, including preretirement, the transition into retirement, and retirement.

Pre retirement

Your retirement is sometime in the future–maybe 10 years, maybe 30 years down the road. If so, you’ve got a little breathing room. The single biggest mistake that you can make right now is to put off thinking about your retirement. The more time you have, the more you can hope to accomplish, so the sooner you start, the better off you should be. You’ve got a lot to think about. There are many factors to consider, including your expected sources of retirement income, your retirement income needs, and how you can use those sources of retirement income to fulfill your retirement income needs.

The transition into retirement

If retirement is right around the corner, you’ve got some important decisions to make. If you haven’t done so, spend some time forming a good picture of your retirement financial position. To the best of your ability, estimate your retirement income and expenses as discussed in pre retirement. As retirement approaches, though, you have to consider the impact of when you retire. Early retirement and delayed retirement, through choice or necessity, can raise certain issues you’ll want to understand.

Retirement

When you retire, there are still some retirement issues that you may need to consider. These include the effect of working during your retirement, and the impact of other sources of income on your Social Security benefits. Also, required minimum distributions from your IRA or employer-sponsored retirement plan may be an issue.

Our qualified financial advisors at Diversified Employer Benefits can help you plan for your retirement today.