Frequently Asked Questions (FAQs)
Insurers that are routinely regarded as being among the very best in the industry are always going to have excellent financial strength ratings and customer satisfaction scores. Accordingly, these companies will receive high marks from these two well-respected financial industry rating organizations: A.M. Best and J.D. Power
The type of coverage selected will be based, largely, on each individual’s or family’s specific situation. TERM coverage is simple and easy to understand, will have more affordable premiums, provides coverage for a specific “term” (amount of time) and it’s a good idea to select a plan that offers convertibility options. PERMANENT coverage is much more complex and, typically, more costly than term while offering more options. There are several kinds of PERMANENT coverage but whole life is the most common and well-known.
To determine how much coverage is needed, it’s recommended to start off by asking a few questions. 1) How much money will my spouse and children need to maintain their current quality of life? 2) If there are young children, how much will be needed to send them to college or trade school? 3) How much will be necessary to pay off my debts, taxes, and other expenses related to my estate?
Having life insurance in-force for both parents makes it much more bearable financially and emotionally for the surviving spouse to keep life as normal as possible for your children after losing a parent. Life insurance can provide the means to cover household expenses, including a mortgage, car payment, rent and/or childcare, without having to worry about the loss of income.
Remember, life insurance is meant to make up for lost income to maintain a certain quality of life. We need to figure out how long your dependents will depend on your income, or in the case of a stay at home spouse, the value you provide in taking care of children or running the household.
So, what’s a realistic amount to get? One way to approach it is to multiply your income by 15 and buy that amount of insurance. If you bring home $60,000 a year you need, roughly, $900,000 in TERM insurance. Of course, this figure can vary as other factors are added in such as paying for college tuition or paying off a mortgage.
Among parents, the opportunity to lock in a very affordable rate, when their child is born (or are at a very young age), is a popular benefit. These rates are not only very affordable, but the premiums are also locked in for the life of the policy. PERMANENT coverage (whole life) also offers the benefit of developing cash value which many often use to help fund or completely pay for college or trade school tuition down the road.
One of the most attractive benefits of insuring children very early is protecting their insurability which provides parents with the peace of mind that they will always be able to maintain coverage going forward. Even if the health condition of a child changes, there will be no change to the existing coverage or premium.
My goal is to provide every client with excellent customer service, and it is my desire to personally assist you whenever assistance is needed. Although I will always be your insurance advisor, clients do sometimes choose to contact customer service in the event I am meeting with another client. In either case, the relationship we share with each client will always be highly regarded and valued.
If your intended beneficiary is a minor, it is a good idea to arrange for the money to go into a trust until that child is about 25 years old. While it is still in the trust, it can only be used for the specific purposes you designated when you set it up. No one else can use the money at all. If you have a spouse and they would make a good trustee, specifically designate them the trustee in advance.
Many consider factoring in the cost of sending their children to college when deciding on the face amount for their life insurance. Some parents choose to include enough coverage to cover the expense for all of their children to attend college or trade school in the unexpected event of their passing. Others, however, may choose to purchase a whole life policy for their children, at birth, with plans to utilize its cash value when the time comes for college.
Mutual insurance companies don’t have shareholders and are, in essence, owned by their policyholders. Therefore, if the insurer makes more money than is needed to run the business, they pay some of it back to policyowners in the form of a dividend. If you have a participating cash value life insurance policy, it means you’re eligible to receive a dividend. Dividends are not guaranteed, but most of the top mutual insurance companies have consistently distributed them for decades.
Dividends are distributed according to the size of your cash value. For example, if Jane had $20,000 of cash value and John had $10,000 of cash value, Jane would receive a dividend twice the size of John’s. You can take dividends as cash, use them to pay premiums, or use them to buy additional coverage.
If you have a life insurance policy with cash value and that policy issues you a dividend, you may have to pay taxes on any amounts above and beyond the premiums you paid. Further, any interest you earn on life insurance dividends or proceeds after you receive the money is taxable as interest income.
Your most valuable asset isn’t your home, your automobile, or your 401k or SEP. It’s your ability to earn a paycheck and make a living. And if you’re unable to meet your financial obligations if your paycheck went away, then DISABILITY coverage is likely an excellent idea. A couple of practical questions to ask yourself: 1) What would you do if you couldn’t work? 2) How long could you go without a paycheck?
“OWN” occupation plans provide coverage if an insured becomes unable to perform substantial and material duties of a SPECIFIC occupation (e.g. physicians, dentists) even if they were able to work in another occupation.
“ANY” occupation plans, in contrast, only provide total disability benefits if an insured is unable to work in ANY occupation. In some states, the insurer is required to pay benefits if the insured is unable to perform ANY occupation for which he or she is suited by education, experience, or training.
So, depending upon your specific situation, one type of disability coverage may be more appropriate than the other.
People buy long-term care coverage for two reasons: 1) To protect savings and 2) To make available more choices for care.
A long-term care insurance policy helps cover the costs of care when you have a chronic medical condition, a disability or a disorder such as Alzheimer’s. Most policies will reimburse you for care given in a variety of places, such as:
– Your home.
– A nursing home.
– An assisted living facility.
– An adult day care center.
Considering long-term care costs are an important part of any long-range financial plan, especially in your 50s and beyond, waiting until you need care to buy coverage is not an option. You won’t qualify for long-term care insurance if you already have a debilitating condition. Most people with long-term care insurance buy it in their mid-50s to mid-60s.
Whether long-term care insurance is the right choice depends on your situation and preferences.