If you are considering the purchase of life insurance but are not sure how much you need consider accessing the following link to a third party Life Insurance Needs Calculator.
What is life insurance?
Life insurance comes in various forms. It is a promise made by an insurance company to pay a death benefit to a beneficiary on the death of the insured, in exchange for a series of premium payments from a policyholder. Typically, the death benefit will be many times larger than any single premium.
What are the benefits of life insurance?
In the most general terms, owning life insurance guarantees that, in the event of the insured's death, a death benefit will be paid to the insured’s beneficiaries. In addition, permanent insurance provides a cash value component from which cash can be accessed for various financial needs such as college tuition, a down payment on a home, business opportunities and more.
Types of life insurance
Everyone needs life insurance, if only to pay final expenses. People with children, or other family members that are financially dependent on them, may need more life insurance than those with other needs or goals. Perhaps the best way to determine if you need life insurance is to ask yourself: "Financially, would my family be able to live tomorrow as they do today, if I were no longer around?" If your answer is no, then you probably need life insurance.
Your questions answered …
Q: If I take a loan from my whole life or universal life insurance policy, will I have to pay it back?
A: Not necessarily. While outstanding loans will reduce the death benefit and may slow the growth of cash value in your policy, there is no requirement that you repay the loan. Before you take a loan, you should be aware of what will happen to your policy if you do so, as some permanent policies are more sensitive to loans than others.
Q: Do I have to pay taxes on the money I take out of my whole life or universal life insurance policy?
A: Generally, you may withdraw cash from your policy, up to the amount of premium you paid, without incurring any taxes under current tax law. However, any withdrawals over your premium payments would be taxable to you as income.
You may take loans from your policy without being subject to taxes as long as your policy remains in force. Any outstanding loans will be deducted from the death benefit of the policy at the time of a claim.
Q: What type of life insurance should I purchase?
A: It depends on your unique needs and financial situation. Only someone familiar with your needs, goals, financial situation and your hopes for the future will be able to discuss this question fully with you. We are happy to sit down with you and discuss your particular situation.
Q: If I buy permanent life insurance, will I have to pay premiums for the rest of my life?
A: Maybe. The guarantees of whole life insurance require that a premium be paid, but that doesn't mean you have to pay it out-of-pocket. Although dividends are not guaranteed, many policyholders use dividends they may receive to pay some or all of their premiums, eliminating out-of-pocket costs.
Universal life insurance only requires that there be enough cash surrender value in the policy to pay any policy charges. In practice, this means that when you've accumulated enough cash value in the policy, you may be able to suspend premium payments. However, not paying premiums will ultimately reduce cash value.
Q: Will I need life insurance after my children are grown?
A: Certainly. Life insurance provides a death benefit that can provide a legacy for your family or beneficiaries. Plus, the death benefit may be an effective way to offset estate taxes or may be used for business succession planning. You may also want to use the cash value you've accumulated in your policy to provide cash flow to you and/or your spouse during retirement.
What is disability income insurance?
Disability income insurance provides you with replacement income if you are unable to work due to an illness or injury. Disability income insurance can help cover your medical bills, your house payment and other monthly expenses.
What's the benefit of having disability income insurance?
One of your most valuable possessions is your ability to earn a living. Take away your income and it’s amazing how quickly you could incur large debt -- just trying to cover your regular monthly expenses.
Plus, an individual disability income insurance product is "portable." That means you own the policy and it stays with you even if you change jobs.
What are the different types of disability income insurance?
Disability income insurance policies for individuals typically come in one of these two forms:
Just about everyone. Whether you're single, married, have children, or own a business, a disability that keeps you out of work can be costly. To maintain your standard of living in the case of a disability, it's important to have this coverage.
You might like to know...
Insuring against disability has not been a high priority for most workers because many assume they're already covered through Social Security, Workers' Compensation or employer plans.
It can happen to you.
Nearly one in four men can expect to suffer a disability that keeps them out of work for 90 days or longer at some point during their working years. For women, the odds are about one in three. And one worker in seven can expect to be disabled for five or more years before retirement.*
Your questions answered ...
Q: I have disability coverage through my employer. Is that enough?
A: If your employer offers disability coverage, take the time to find out if it's sufficient to meet your income-replacement needs. If it's not, you can purchase coverage on your own. One of the benefits of individual coverage is that it stays with you even when you change jobs.
Q: How much disability income insurance do I need?
A: Find out by using this simple calculator from the nonprofit Life and Health Insurance Foundation for Education, or by discussing your situation with us.
The following link contains a video featuring a friend of mine and her husband and tells their story about an unexpected disability and the key role Disability Insurance played in their life. If you are interested in learning more about Disability Insurance please give us a call.
70% of people turning age 65 can expect to use some form of long-term care during their lives. There are a number of factors that affect the possibility that you will need care:
Long-Term Care is a range of services and supports you may need to meet your personal care needs. Most long-term care is not medical care, but rather assistance with the basic personal tasks of everyday life, sometimes called Activities of Daily Living (ADLs), such as:
*Source: longtermcare.gov - U.S. Department of Health and Human Services
This week, the Tennessee General Assembly passed the much talked about sinkhole bill. The bill amended the already existing law which required companies to make sinkhole coverage available.
The new law says:
Every insurer offering homeowner property insurance in this state shall make coverage available for insurable sinkhole losses, including contents of personal property contained in the dwelling. The insurer may require an inspection of the property before issuance of sinkhole loss coverage. Nothing in this section mandates that sinkhole loss coverage be included in any homeowner property insurance policy, but only that insurers offering homeowner property insurance make such coverage available for optional purchase on request by policyholders.
While some companies offer Sinkhole coverage as an optional coverage, some companies include this coverage automatically. Check your policy to see if you have or may need sinkhole coverage.
Photo below of Florida home swallowed by Sinkhole
Many people wonder if they should purchase the insurance offered by rental car companies which can range from $15-$25 per day in some cases. The short answer is, "Yes". I encourage our clients to purchase the car insurance from the rental company when renting an automobile. The biggest reason I recommend this is because most personal auto policies do not cover Loss of Use or Diminution of Value to a rental car. As an example, let's assume you rent a car and don't purchase the insurance from the rental car company but you carry full coverage on your personal auto policy (meaning you have Comprehensive and Collision coverage). If you have an accident in the rental car, your personal insurance company will pay for the direct damage to the vehicle, less your deductible, but you are personally responsible for any Loss of Use or Diminution of Value claims from the rental car company. Loss of Use is basically the revenue the rental car company may lose because they are not able to rent out the vehicle you wrecked while it is being repaired. Diminution of Value is the loss in value to the vehicle because the vehicle now has a history as a wrecked vehicle. The Diminution of Value claim is a difficult one to quantify but some simple math can give you an idea of a typical Loss of Use claim. If it takes 3 weeks to get the wrecked rental car fixed and the rental company normally rents the vehicle for $25/day then they have lost $525 (not counting their administrative time for dealing with this incident). In this case, your would be responsible for your deductible (let's say $500) plus the Loss of Use ($525 and possibly more for administrative costs) and this loss will now appear on your personal auto policy and possibly impact your personal auto rates. While the rental car companies insurance isn't cheap, purchasing could save you a lot of money and a fair amount of hassle.
Bill Loran, CFP® is a partner at CrossStone Insurance & Wealth Management, Inc. and is passionate about providing high quality insurance advice and solutions