Life / Health Insurance / Disability
|
Is your policy outdated? Get a free check up now!
Just bring in your present policy for a free review. If you have purchased your life insurance more than two years ago most likely you can save some money since it might be outdated. You have nothing to lose. Bring your policy in now.
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the followingsituations:
Replace income for dependents
If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.Pay final expenses
Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.Create an inheritance for your heirs
Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.Pay federal “death” taxes and state “death” taxes
Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal “death” tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level “death” taxes.Make significant charitable contributions
By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy’s premiums.Create a source of savings
Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).
The principal types of life insurance
There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.
Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.
Term
Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.
There are two basic types of term life insurance policies—level term and decreasing term.
Level term means that the death benefit stays the same throughout the duration of the policy.
Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.
In 2003, virtually all (97 percent) of the term life insurance bought was level term.The Price Is Right
Rates that are lower than those of a decade ago mean it’s a good time to review your client’s coverage.
We generally expect what we buy today to cost more than it did 10 years ago. This is most prevalent for products such as health insurance and gasoline, but the cost of other necessities, from grocery purchases to clothes to household goods, also rises with inflation. But not term life insurance-it actually costs less today than it did 10 years ago.
The reasons for this downward trend in the cost of term life premiums are improved underwriting, longer life expectancy and increased competition among companies, according to Michael Kalen, executive vice president of Hartford Financial Service Group’s individual life insurance division.
According to a recent LIMRA analysis of life insurance have grown steadily since the early 1990’s from 13 percent of market share in 1993, to an estimated 23 percent in 2005. In the same period, whole life insurance’s market share declined from nearly half in 1995, to an estimated 23 percent in 2005.
Whole life and other permanent coverage products have not seem the same kind of rate drop-off largely because costs for permanent coverage depend heavily on mortality assumptions and investment returns. The low interest rates and equity returns during the past decade have generally offset the benefits of mortality improvement, according to Hartford.
The time is now
“With (Term) life insurance rates dropping to their lowest levels in 10 years, there has never been a better time to review your clients’ life insurance coverage,” Kalen says.
Whole Life/Permanent
Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.
In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So they keep the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.
By law, when these “overpayments” reach a certain amount, they must be available to the policyowner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.
In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.
© Insurance Information Institute, Inc. - ALL RIGHTS RESERVED -
Ask us today about IRA's...Keoghs...Seps and other retirement plans. Start saving for your future today.
Health Insurance
The rising cost of medical care and the resulting pressure on health insurance premiums makes health insurance top priority if you want to have your health expenses covered at a reasonable cost. The current health insurance system is quite complex and constantly changing.
There are essentially two kinds of heath insurance: Fee-for-Service and Managed Care. Although these plans differ, they both cover an array of medical, surgical and hospital expenses. Most cover prescription drugs and some also offer dental coverage.
Fee-for-Service
These plans generally assume that the medical professional will be paid a fee for each service provided to the patient. Patients are seen by a doctor of their choice and the claim is filed by either the medical provider or the patient.Managed Care
More than half of all Americans have some kind of managed-care plan. Various plans work differently and can include: health maintenance organizations (HM0s), preferred provider organizations (PPOs) and point-of-service (POS) plans. These plans provide comprehensive health services to their members and offer financial incentives to patients who use the providers in the plan.
© Insurance Information Institute, Inc. - ALL RIGHTS RESERVED -
Disability Insurance
Disability insurance pays an insured person an income when that person is unable to work because of an accident or illness.
If you were disabled and unable to work as a result of an accident or illness, what would you and your family do for income?
Disability income insurance, which complements health insurance, can replace lost income. At age 40, the average worker faces only a 14 percent chance of dying before age 65 but a 21 percent chance of being disabled for 90 days or more.
There are three basic ways to replace income:
Employer-paid disability insurance
This is required in most states. Most employers provide some short-term sick leave. Many larger employers provide long-term disability coverage as well, typically with benefits of up to 60 percent of salary lasting from five years to age 65, and in some cases extended for life.Social Security disability benefits
This can be paid to workers whose disability is expected to last at least 12 months and is so severe that no gainful employment can be performed.Individual disability income insurance policies
Other limited replacement income is available for workers under some circumstances from workers compensation (if the injury or illness is job-related), auto insurance (if disability results from an auto accident) and the Department of Veterans Affairs.For most workers, even those with some employer-paid coverage, an individual disability income policy is the best way to ensure adequate income in the event of disability. When you buy a private disability income policy, you can expect to replace from 50% to 70% of income. Insurers won’t replace all your income because they want you to have an incentive to return to work. However, when you pay the premiums yourself, disability benefits are not taxed. (Benefits from employer-paid policies are subject to income tax.)
There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD):
Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years.
Long-Term Disability policies (LTD) have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Disability policies have two different protection features that are important to understand.
Noncancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.
In addition to the traditional disability policies, there are several options you should consider when purchasing a policy:
Additional purchase options
Your insurance company gives you the right to buy additional insurance at a later time.Coordination of benefits
The amount of benefits you receive from your insurance company is dependent on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.Cost of living adjustment (COLA)
The COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index. You will pay a higher premium if you select the COLA.Residual or partial disability rider
This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.Return of premium
This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.Waiver of premium provision
This clause means that you do not have to pay premiums on the policy after you’re disabled for 90 days.
© Insurance Information Institute, Inc. - ALL RIGHTS RESERVED -
930 Washington Street, Hoboken, New Jersey 07030 • 201-659-2403 • fax 201-659-0373
Licensed in: New Jersey, New York, Delaware, Connecticut, Vermont, Florida, Pennsylvania, Arizona, New Mexico, South Carolina and Ohio
Links | Privacy Rights, Copyrights, Disclosures and Disclaimers | © Copyright 2007