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Life Insurance with Long Term Care Benefits

Life Insurance with Long Term Care Benefits

If you’re concerned about the high costs of long-term care but don’t want to purchase traditional long-term care (LTC) insurance, you might consider two strategies that combine permanent life insurance coverage with long-term care benefits.

Keep in mind that any payouts for covered LTC expenses reduce (and are usually limited to) the life insurance death benefit that would go to your heirs, and benefits can be much less than those of a traditional long-term care policy.

Accelerated Death Benefits (ADB) Rider

An ADB rider attached to a permanent life insurance policy allows the insured to begin receiving benefits while he or she is still living, under specific circumstances.

In the past, ADB riders only paid when a policyholder was diagnosed with a terminal illness. However, more insurers now offer riders that start paying when a policyholder is diagnosed with a chronic illness, is permanently disabled, or needs to enter a nursing home.

Although some policies may include an ADB rider at little or no cost, ADB riders are generally optional and will increase the premium.

Hybrid Life — LTC policy

This type of policy combines permanent life insurance and long-term care coverage. Many such policies require a substantial up-front premium, but buyers don’t have to worry about future rate increases or the issuer canceling the policy.

For the same premium, a hybrid policy typically has a smaller death benefit than a life policy with an ADB rider. However, the LTC coverage is more generous than an ADB rider.

 

Cost of Care

Benefits under a hybrid policy typically begin when the policyholder needs help with two or more activities of daily living such as eating, bathing, and dressing.

With an optional continuation-of-benefits rider, payouts for covered LTC expenses could continue for a specified period or your lifetime, even if they exceed the death benefit.

Financial flexibility

Another advantage of these strategies is that policyholders can tap into the cash value of the permanent life policy during retirement if money is needed for income or emergencies. Loans and withdrawals will reduce the policy’s cash value and death benefit.

Other considerations

It would be wise to explore your LTC options while you are healthy. If you consider a life insurance policy with an ADB rider or a hybrid life-LTC policy, you should have a need for life insurance and evaluate the policy on its merits as life insurance.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. In addition to the life insurance premiums, other costs include mortality and expense charges. If a policy is surrendered prematurely, there may be surrender charges and income tax implications.

Any guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company. Riders are subject to the contractual terms, conditions, and limitations outlined in the policy, and may not benefit all individuals.

 

Replacement and Conservation Considerations for Life Insurance Policies

Replacement and Conservation Considerations for Life Insurance Policies 

What is it? 

Life insurance can be complicated. Yet many people have life insurance because they recognize the need to provide adequate resources for their dependents when they die. Many others treat their life insurance policies as investments from which they hope to realize a sizable return. If you own a policy, you probably derive peace of mind from the protection it offers, and you may even make money for yourself at the same time. You probably also remember how much work went into choosing the right insurance company and the particular policy that’s best for you. 

Even after you finally decide on a policy, your work is far from over. The purchase of a policy is only the first step in an ongoing process that should include periodic reevaluations of both the company and your policy. It makes sense that you should keep track of the company’s performance and continue to feel that the policy you chose still matches your needs and circumstances. Don’t be surprised if a conscientious review indicates the need to replace or exchange your policy. And yet there will be times when it’s definitely wise to keep your existing policy in place. A middle ground course of action between the two extremes of replacing a policy and keeping it without making any changes at all is to adjust the level or amount of coverage provided by your existing policy. Another possible strategy is to transfer the interest in your policy to another party. If you exercise this option, be aware of how the transfer-for-value rule might apply to the transfer. 

Usually all of these replacement and conservation considerations require that you consult additional resources such as a financial professional, a CPA, an insurance agent, and/or insurance companies before making any decisions. 

What are some specific replacement/conservation considerations? 

When to replace or exchange a policy 

There are many possible reasons for replacing your existing life insurance policy. However, there is no precise formula to tell you when replacement is the best strategy to follow. The final decision will ultimately depend on your individual situation. In general, though, reasons to replace might include dissatisfaction with your company or various aspects of your policy and changes in your financial circumstances or coverage needs. If changes are drastic or your dissatisfaction is extreme, you should probably consider replacement as an option. 

Reasons to keep existing policies 

Reasons to keep existing policies are many and varied and do not constitute anything close to an exact science. You certainly shouldn’t let laziness or fear of change keep you from replacing your existing policy, but there are legitimate reasons why you might want to leave it as is. If you’ve been happy with the company and the policy, if the terms and provisions of the policy still suit your coverage needs, and if your financial circumstances haven’t changed much since you bought the policy, there may be no grounds for a change. In fact, there may be tax issues, insurability issues, replacement costs, and other considerations that induce you to stick with your existing policy. 

Changing levels of coverage 

If you feel that your circumstances warrant some kind of change but you’re unwilling to replace your policy, the appropriate strategy may be to simply change your level of coverage. This involves adjusting the amount of the death benefit (either up or down) payable to your beneficiary if you die and will often require a corresponding adjustment to your premium. Reasons to alter your coverage level might include marriage or divorce, children or other additions to your family, employment changes, and changes to your financial situation. 

Transferring policies 

Under certain circumstances, it may be to your advantage to transfer all the interest in your life insurance policy to another party. This is generally known as a transfer of ownership or an absolute assignment and involves assigning ownership of the policy to someone other than you, the person named as the insured party. Such transfers are an exception to the general rule that the owner of a life insurance policy and the insured are one and the same. You may also be able to transfer some–rather than all–of the ownership rights in your policy. However, flexibility in terms of ownership rights will vary from one policy to the next, so read the appropriate clauses in your contract. A transfer may be an appropriate option if you want to use some of the interest in your policy as collateral for a bank loan and may be advantageous for tax and other reasons, as well. 

Transfer-for-value rule 

Section 101(a)(1) of the Internal Revenue Code provides for the income tax free status of life insurance death benefits paid to your beneficiary upon your death. The transfer-for-value rule is an important exception to this general rule. If you transfer an interest in your policy to another party in exchange for valuable consideration, Section 101(a)(1) no longer applies, meaning that the portion of death benefits paid under the policy exceeding the value of the consideration paid by the transferee plus any premiums paid by the transferee after the transfer, may now be subject to income tax. Thus, you should find out how this might apply to you if you are considering a transfer of all or part of your policy. 

 

IMPORTANT DISCLOSURES 

This material was prepared by Broadridge Investor Communication Solutions, Inc. This information is believed to be from reliable sources; however, no representation is made as to its accuracy or completeness. This information does not constitute tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty, nor is it a solicitation or recommendation to purchase or sell any insurance or investment product or service, and readers should not rely upon it as such. Readers should seek such advice from their own tax or legal counsel or financial professional. Securities, investment advisory and financial planning services through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 6 Corporate Drive, Shelton, CT 06484. Tel: 203-513-6000. 

New Life Insurance? There are different kinds.

New Life Insurance? There are different kinds.

The Covid-19 pandemic affected the lives of Americans in many ways. One of those ways has been a desire to financially protect oneself and loved ones. Almost one in three consumers (31%) say they are more likely to buy life insurance because of the pandemic, according to the LIMRA 2022 Insurance Barometer.

But what kind of life insurance? For most people the choice can be broken down into two main policy categories – Term Life Insurance and Permanent Life Insurance. Term life insurance has an expiration date, while whole life insurance, which is the widely purchased permanent insurance, lasts for one’s entire life.

It’s not unusual for people to own each kind, as both types of insurance have their benefits. Term life can give an individual and family coverage for a significant time, say, while children are growing up and perhaps going to college. One or both spouses can be covered. Both may be major earners, or one may be the major breadwinner, but the other spouse may have major responsibilities with children and the home. Renewing a term life policy is generally more expensive, though.

The difference from term life is that whole life lasts for an insured’s lifetime and the cash value of a whole life policy typically earns a fixed rate of interest. The policy pays a beneficiary or beneficiaries upon the insured’s death. Importantly, whole life has a cash savings component, which the policy owner can draw or borrow from. Outstanding loan principal and interest reduce death benefits.

While whole life is the leader among permanent insurance, there are options. One is universal life insurance, which allows policy owners to make changes to both the premium and the death benefit. However, the rate of growth for cash value, is subject to change and is based on an interest rate set by the insurance company. There is still a guaranteed death benefit.

Another option, aptly named, is variable life insurance. This is influenced by the behavior of the financial markets. The cash value of this insurance grows based on investments in mutual funds that are offered by the life insurance company. The growth of the cash account correlates to broader market trends, so it’s possible to see faster increases than you’d see with other types of permanent life insurance. However, there is no guaranteed minimum cash value. The death benefit for variable life insurance can fluctuate over time but still has a guaranteed minimum amount.

These different types of insurance could benefit you and your family, but as this article outlines, there are nuances, and what is appropriate for one person may not be for another. It’s important to discuss the options with a financial professional.

Annuities and Retirement Planning

Annuities and Retirement Planning

Retirement planning encompasses establishing and attaining financial objectives while ensuring a secure and comfortable retirement phase. Annuities are indispensable retirement planning tools. They’re contractual agreements between you and an insurance company, carefully crafted to furnish a reliable income stream throughout retirement or a designated period.

While annuities offer a guaranteed income stream, they come with high fees and limited control, making them high-risk retirement options. Other options like Social Security provide affordable benefits but lack guarantees, while employer-backed pensions offer more generous benefits, requiring a comprehensive understanding of maximum reward in retirement planning.

The Benefits of Annuities for Retirement Planning

Guaranteed Income Stream in Retirement

Annuities provide a guaranteed income stream in retirement by converting your lump sum or regular payments into a steady stream of payments for life or a fixed period. With options like immediate or deferred annuities, you can be sure of a reliable source of income during your golden years, regardless of market fluctuations or other economic uncertainties.

Asset Protection Against Inflation

Annuities safeguard assets from inflation through fixed or indexed payments, preserving financial security throughout your lifetime. Fixed annuities provide a stable income, protecting against inflationary erosion. On the other hand, indexed annuities link returns to market indices, enabling potential growth beyond inflation.

Reduced Risk of Outliving Your Savings

With longevity risk protection, you can receive payments even if you live longer than anticipated. The benefit provides a lifelong safety net, sparing you from the fear of exhausting your savings prematurely and providing a sense of financial security during your entire retirement journey.

You Can Pass on Your Assets to Your Heirs

You can pass on assets to your heirs as a means of wealth transfer, creating a lasting financial legacy with some annuity options. For instance, a “joint and survivor” annuity allows continued payments to a beneficiary after the annuitant’s passing. Alternatively, a “guaranteed period” annuity ensures a designated time frame of payments to beneficiaries.

The Drawbacks of Annuities for Retirement Planning

Complexity and Expensiveness

Riders, fees, and surrender charges can complicate annuities by introducing additional terms and costs, which affect contract flexibility, earnings potential, and the total amount of money you can receive. Additionally, ongoing management and administrative expenses contribute to the overall cost of these financial products, requiring a complete understanding of the terms before investing.

Limited Flexibility and Control Over Your Money

Annuities can limit flexibility and financial control, creating challenges for individuals who seek adaptable investment options to adjust to unforeseen circumstances. The long-term commitments, surrender charges, or excessive fees demanded by these financial products can hinder access to funds. Moreover, annuitization’s fixed payment schedule restricts adjustments, further diminishing control over your money in the face of changing financial needs.

Surrender Charges for Early Withdrawals

Annuities can impose surrender charges on early withdrawals to deter you from accessing funds before the predetermined maturity date, significantly reducing the amount disbursed. Carefully consider the implications of withdrawing funds prematurely to understand the specific terms of your annuity contracts to avoid surrender charges.

How to Choose the Right Annuity for Retirement Planning

Consider Your Financial Goals and Risk Tolerance

Start by defining your retirement goals, considering factors like a steady income, wealth preservation, or growth opportunities. Assess your willingness and ability to take on risk, as some annuities offer guarantees but lower potential returns, while others may have higher growth prospects but come with greater risk.

Consider Your Time Horizon

Annuities with long payment periods or flexible withdrawal options are more suitable for someone with extended retirement years or uncertain expenses. On the other hand, shorter-term annuities may work well for retirees who have a clearer understanding of their financial needs.

Consider Your Tax Situation

Understand your income, deductions, and tax bracket to optimize tax-efficient strategies, minimize liabilities, and maximize after-tax income and savings.

Compare Different Annuity Products and Features

Each annuity product has its benefits and challenges. Fixed annuities offer stable income and a guaranteed fixed interest rate but may not keep up with inflation. Variable annuities allow investment in options like stocks and bonds but lack income guarantees. Indexed annuities combine features, offering returns based on market indices with some downside protection. Choose a solution that aligns with your retirement needs and requirements.

Annuities are a Valuable Retirement Tool but Not for Everyone

While annuities play a vital role in retirement planning, they may not suit everyone’s needs. Consider your goals, risk tolerance, and financial circumstances to ensure that your preferred annuity aligns with your specific requirements and contributes to a successful retirement strategy.

And as always, consult with a financial professional before making any major financial decisions, such as purchasing an annuity.

Protecting Your Loved Ones with Life Insurance

Protecting Your Loved Ones with Life Insurance

How much life insurance do you need?

Your life insurance needs will depend on a number of factors, including the size of your family, the nature of your financial obligations, your career stage, and your goals. For example, when you’re young, you may not have a great need for life insurance. However, as you take on more responsibilities and your family grow, your need for life insurance increases.

Here are some questions that can help you start thinking about the amount of life insurance you need:

    • What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death?
    • How much of your salary is devoted to current expenses and future needs?
    • How long would your dependents need support if you were to die tomorrow?
    • How much money would you want to leave for special situations upon your death, such as funding your children’s education, gifts to charities, or an inheritance for your children?
    • What other assets or insurance policies do you have?

Types of life insurance policies

The two basic types of life insurance are term life and permanent (cash value) life. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1 to 30 years and may, in some cases, be renewed until you reach age 95. With guaranteed level term insurance, a popular type, both the premium and the amount of coverage remain level for a specific period of time.

Permanent insurance policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash-value account. During the early years of the policy, the cash-value contribution is a large portion of each premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow–tax deferred–as long as the policy is in force. You can borrow against the cash value, but unpaid policy loans will reduce the death benefit that your beneficiary will receive. If you surrender the policy before you die (i.e., cancel your coverage), you’ll be entitled to receive the cash value, minus any loans and surrender charges.

Many different types of cash-value life insurance are available, including:

    • Whole life: You generally make level (equal) premium payments for life. The death benefit and cash value are predetermined and guaranteed (subject to the claims-paying ability and financial strength of the issuing insurance company). Your only action after purchase of the policy is to pay the fixed premium.
    • Universal life: You may pay premiums at any time, in any amount (subject to certain limits), as long as the policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value will grow at a declared interest rate, which may vary over time.
    • Indexed universal life: This is a form of universal life insurance with excess interest credited to cash values. But unlike universal life insurance, the amount of interest credited is tied to the performance of an equity index, such as the S&P 500.
    • Variable life: As with whole life, you pay a level premium for life. However, the death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts. A subaccount is a pool of investor funds professionally managed to pursue a stated investment objective. You select the subaccounts in which the cash value should be invested.
    • Variable universal life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value and death benefit goes up or down based on the performance of investments in the subaccounts.

With so many types of life insurance available, you’re sure to find a policy that meets your needs and your budget.

Choosing and changing your beneficiaries

When you purchase life insurance, you must name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as a beneficiary, you should also designate an adult as the child’s guardian in your will.

What type of insurance is right for you?

Before deciding whether to buy term or permanent life insurance, consider the policy cost and potential savings that may be available. Also keep in mind that your insurance needs will likely change as your family, job, health, and financial picture change, so you’ll want to build some flexibility into the decision-making process. In any case, here are some common reasons for buying life insurance and which type of insurance may best fit the need.

Mortgage or long-term debt: For most people, the home is one of the most valuable assets and also the source of the largest debt. An untimely death may remove a primary source of income used to pay the mortgage. Term insurance can replace the lost income by providing life insurance for the length of the mortgage. If you die before the mortgage is paid off, the term life insurance pays your beneficiary an amount sufficient to pay the outstanding mortgage balance owed.

Family protection: Your income not only pays for day-to-day expenses, but also provides a source for future costs such as college education expenses and retirement income. Term life insurance of 20 years or longer can take care of immediate cash needs as well as provide income for your survivor’s future needs. Another alternative is cash value life insurance, such as universal life or variable life insurance. The cash value accumulation of these policies can be used to fund future income needs for college or retirement, even if you don’t die.

Small business needs: Small business owners need life insurance to protect their business interest. As a business owner, you need to consider what happens to your business should you die unexpectedly. Life insurance can provide cash needed to buy a deceased partner’s or shareholder’s interest from his or her estate. Life insurance can also be used to compensate for the unexpected death of a key employee.

Review your coverage

Once you purchase a life insurance policy, make sure to periodically review your coverage; over time your needs will change. An insurance agent or financial professional can help you with your review.

Your life insurance needs will depend on a number of factors, including whether you’re married, the size of your family, the nature of your financial obligations, your career stage, and your goals. Life insurance is not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association.

A note about variable life and variable universal life insurance

Variable life and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy.

IMPORTANT DISCLOSURES

This material was prepared by Broadridge Investor Communication Solutions, Inc. This information is believed to be from reliable sources; however, no representation is made as to its accuracy or completeness. This information does not constitute tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty, nor is it a solicitation or recommendation to purchase or sell any insurance or investment product or service, and readers should not rely upon it as such. Readers should seek such advice from their own tax or legal counsel or financial professional.

Using Fixed Annuities as a Retirement Tool

Using Fixed Annuities as a Retirement Tool

A fixed annuity is a contract between you and an insurance company, guaranteeing steady income payments. It’s ideal for anyone needing a stable, predictable income for retirement or achieving long-term financial goals. You invest by giving the insurance company a lump sum or a series of payments, known as an annuity, during a surrender period. In return, the insurer agrees to pay you a monthly fixed amount after the surrender period.

Your insurer determines where to invest your annuity funds to generate returns and provide you with an income stream during the annuity payout phase. The monthly amount you receive depends on your annuity contributions, age, and the insurer’s interest rate, which remains constant regardless of financial market fluctuations.

Benefits of Fixed Annuities

Guaranteed Income

Fixed annuities are more stable and predictable because distributions don’t depend on market gains or losses. The investment grows at a fixed rate determined by your insurer. You can also predict how your annuity balance will grow over time. Your contract also assures you of receiving a monthly minimum payment during the stipulated period.

Tax-Deferred Growth

Your earnings in fixed annuities are not subject to immediate taxation. Thus, your earnings accumulate without tax implications. Tax gets deferred to the distribution phase when you’re in a lower tax bracket.

Death Benefit

Your beneficiaries also benefit from your fixed annuities investment. If you die before you start receiving payments, your successors will receive a lump sum payment that is typically equal to the value of your annuity. Thus, the investment ensures your loved one’s financial security even after you’re gone.

Protection From Market Volatility

The guaranteed fixed interest rate covers your investment against market dynamics. Thus, your income stability is secure during the distribution phase.

Risks in Fixed Annuities

High Fees

Although fixed annuities have lower fees than other investment products, they can have unforeseen charges that can set you back by a few dollars. Sometimes the costs are hard to discern without scrutinizing your contract.

Typical fees in fixed annuities include:

  • Premiums: An initial lump sum or payment series to purchase your annuity.
  • Commissions: You may pay a ten-year fixed commission in the surrender period, ranging between 6% and 8% for most fixed index annuity investments.
  • Administration Fees: These can be a fixed annual fee or approximately 0.3% of your annuity contract’s value.
  • Surrender Charges: Get paid for early withdrawals beyond scheduled payments.
  • Mortality Expenses: May be charged as commission to compensate your insurer.
  • Riders: Extra fees included in your contract.

Limited Liquidity

Fixed annuities attract a hefty penalty or surrender charges when you access your funds before your contract matures. The incurred fees discourage early withdrawals to maintain the investment. However, in doing so, it limits the investment’s liquidity.

Lack of Flexibility

Although fixed annuities investors have guaranteed returns, they’re less flexible; the investment has:

  • Strict withdrawal options during the surrender period
  • No benefits from potential market interest rates because of the preset interest rates
  • Limited investment options determined by your insurer
  • Limited liquidity necessary to address immediate financial needs

Examples of Fixed Annuities

  • Single Premium Deferred Annuity (SPDA): Requires a lump sum payment upfront. The funds accumulate and earn a fixed interest rate until the annuitant decides to start receiving payouts.
  • Multi-Year Guarantee Annuity (MYGA): Offers a fixed interest rate for a predetermined period, ranging from 3 to 10 years. The annuitant can choose the length of the guarantee period based on their preferences.
  • Immediate Annuity: You receive regular income payments immediately or shortly after the purchase making a lump sum payment for the contract.
  • Fixed Index Annuity (FIA): Provides a fixed interest rate linked to the performance of a specific stock market index. The annuitant receives a minimum guaranteed interest rate and the potential to earn additional interest based on the index performance.

Conclusion

Fixed annuities are an excellent option if you’re looking for a guaranteed income stream in retirement. However, consider your circumstances and goals and weigh the pros and cons before investing. Speak with a financial professional about your options and understand the risks and benefits before making the decision to purchase a fixed annuity.

More Than One Type of Life Insurance

life insurance

The pandemic has influenced all our lives in different ways, some tragic, but also some that have made us rethink our needs and goals. Some of us have decided they want a new type of career; some have devoted more of their lives to helping others. One impact has been to protect loved ones in case something happens to us by purchasing a life insurance policy. But there’s more than one type of life insurance available.

Millennials

After climbing steadily for many years, life expectancy fell by 1.5 years from 2019 to 2020 – the largest one-year dip since World War II. A survey by Life Happens and LIMRA, a research organization, published in April 2021 found that about 31% of consumers said they are more likely to buy life insurance because of the pandemic. The survey also shows that 45% of millennials said they are more likely to buy life insurance because of COVID-19, possibly because they have more years of income to protect, are more likely to have children and may still have large balances on their mortgages or even student loans.

Whole Life Insurance

When most people think about life insurance, they focus on term life, which offers the lowest cost and covers the insured for a fixed period, say 20 or 30 years. Certainly, term insurance can play an important role, but it may not be enough on its own for extended retirement planning.

Enter whole life insurance and some of its offshoots, which fall into the category of permanent life insurance. With whole life, a portion of your premiums are invested alongside highly rated companies and will grow on a tax-deferred basis. Some believe that whole life is for wealthier people who are doing longer term planning and want to leave a legacy, when, in reality, there are many benefits to the average investor, including fast access to cash for expenses or opportunities (typically 1-2 days) and the benefit of knowing your equity is increasing annually every year.

Whole life insurance offers three kinds of guarantees:

  • Guaranteed minimum rate of return on the cash value, typically between 2% and 4%
  • The guarantee that your premiums won’t increase
  • A guaranteed death benefit that will never decrease

Universal Life

As noted, there are various offshoots of whole life insurance. One is universal life. Unlike traditional whole life, the cash-value component accumulates interest at rates tied to market interest rates. When rates are high, you pay lower premiums to get the same amount of cash value. However, if interest rates are low, premiums may need to increase. 

Prepaid life Insurance

Another alternative is single premium life insurance (SPLI), also known as prepaid life insurance. Instead of paying a premium in monthly or annual installments as you would with other kinds of life insurance, you pay for the policy up front to secure a death benefit when you die. As with other forms of permanent insurance, your premium funds both the death benefit and a cash value amount.

There are other vehicles which can be used to supplement your savings, such as variable life and variable-universal life. All these policies have their complexity and their value. It can be worthwhile to learn more about them from your financial professional today.

Why Car Insurance Costs are Climbing: Insights into Expensive Premiums

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car insurance

Summer is almost over, and many people still yearn for the open road after suffering through two years of a pandemic. In fact, drivers nationwide are shopping for a new car.

Full-year retail sales are forecast to increase from 11.7 million in 2022 to 12.4 million in 2023 according to Cox automotive sales. Cox chief economist Jonathan Smoke noted on the firm’s mid-year review that, “Consumers always find a way to buy new wheels despite the circumstances. Americans are not only car-dependent but have a love for cars.”

“Heading into the second half of the year, however, the market will likely see fewer upside surprises, Smoke added. “The market will still be limited by total available supply, but demand will also be limited by the level of prices and rates, which are not likely to come down enough to stimulate more demand than the market can bear.”

Outpacing Inflation

Prices are not the only determination for many buyers. There are other factors to consider. “Auto insurance costs were up about 15% in March from a year earlier, significantly higher than the latest reading on overall inflation of 5%. The average annual premium is about $2,000”, according to the personal finance website Bankrate, says Ann Carns of The New York Times.

Plus, car insurance prices are expected to continue rising. The chief executive of the insurer Progressive said in a shareholder letter that the company planned to be “aggressive with raising rates over the remainder of the year.” Allstate said it expected to pursue additional increases in 2023 “to improve auto insurance profitability,” Ms. Carns added.

Speak With Your Agent

Joseph D. Sanzo, senior insurance professional at Barnum Financial Group, states, “Claims are becoming much more expensive and drawn out. So even if you haven’t had any claims or don’t drive as much, you are still going to see your rates increase.”

Sanzo continues, “A perfect example would be to look at the cost of vehicles. A 2018 Honda Civic Sport MSRP was $20,150 brand new, whereas a 2023 Honda Civic Sport MSRP is $25,350 — a 26% increase in just five years. With the cost of vehicles only being a portion of what is paid during a claim — other factors to consider are medical costs for injuries and labor costs — most people are only seeing increases in their premiums of anywhere from 5%-25% over that same five-year time. There are many factors that can positively impact your rates, and having a discussion with your agent can help find the best options for you.”

The Overall Impact of Life Insurance

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impact of life insurance

The decision to buy life insurance is usually for personal financial security and that of your loved ones. But is it just a financial tool, or there are other benefits you can get from life insurance?

Life insurance cushions you against the impact of the uncertainties of life. To your family members, it can help settle your debts in case of death or provide a more comfortable life after destabilizing accidents or injuries. Let’s explore the benefits of life insurance beyond the financial aspect.

Providing Peace of Mind and Security

In case of a policyholder’s death, life insurance provides a safety net through a lump sum or regular payments, depending on the terms of the cover. This amount can help meet living expenses, mortgage payments, education costs, and other financial obligations for the loved ones.

Outstanding debts such as a mortgage, car loans, or credit card debt can take a toll on the family if the breadwinner passes away. However, if there is life insurance, it can settle these obligations and cater to dependents’ needs, such as children’s education, estate taxes, and funeral costs.

Enabling Life Goals and Dreams

We all want a bright future for our children or spouse in the event of a personal tragedy. Life insurance can help guarantee your children’s education or your spouse’s retirement to maintain living standards when you’re gone.

You can also consider universal life insurance for the cash value component beyond the death benefit. This policy allows you to contribute premiums for accumulated cash value, which you can use for regular expenses or investments. The flexibility of universal life insurance will enable you to use it as a financial resource to fund your dreams.

Whether you want to pursue a business venture or travel the world, you can use life insurance to meet these goals. If you’re an aspiring entrepreneur, you can use the cash value of life insurance to get initial capital for your business.

Fostering Stronger Relationships and Legacy

Although it’s seen as a financial tool, life insurance demonstrates that you care for your loved ones and their future. This aspect can create a deep bond, especially where beneficiaries understand you’re concerned about their welfare beyond your lifetime.

Life insurance is also a form of legacy planning beyond the current generation. The fund can help in philanthropy causes if it’s designated to charity organizations or educational institutions. By incorporating philanthropy into your life insurance planning, you can make a meaningful contribution to society and leave a positive impact beyond your life.

Impacting Communities and Businesses

After taking premiums from policyholders, life insurance companies invest the resources in stocks, bonds, real estate, and alternative investments. Consequently, the capital helps stimulate economic growth through the circulation of money and the expansion of businesses.

To educational and medical institutions, life insurance helps in cash flows by paying school fees and medical bills for the beneficiaries. When a policyholder directs the benefits to infrastructure projects, the funds help improve communities’ overall well-being and resilience.

Statista shows that the life insurance industry in the US is worth close to $1 trillion. This statistic shows that the sector contributes significantly to employment and economic growth, with over 360,000 individuals working in life insurance.

Addressing Common Concerns and Misconceptions

Most people view life insurance as an expensive and complex financial process. This is unfounded, and engaging a financial advisor can help you clear up some of your misconceptions.

There are various life insurance types, each with a different premium, depending on the policyholder’s needs. Some of the most common types of life insurance are term life, whole life, and universal life. Each has benefits, and the premiums are flexible to meet your needs.

Conclusion

Life insurance is an essential financial strategy that goes beyond providing financial security to the policyholder and their loved ones. It gives you peace of mind knowing that the needs of your family members are taken care of even if you’re not there.

Consider life insurance and help your loved ones in fulfilling their dreams. Those left behind don’t have to struggle to settle debts, meet daily needs, or pay for their education.

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Caring for Your Aging Parents

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Caring for your aging parents is something you hope you can handle when the time comes, but it’s the last thing you want to think about. Whether the time is now or somewhere down the road, there are steps that you can take to make your life (and theirs) a little easier. Some people live their entire lives with little or no assistance from family and friends, but today Americans are living longer than ever before. It’s always better to be prepared.

Mom? Dad? We need to talk

The first step you need to take is talking to your parents. Find out what their needs and wishes are. In some cases, however, they may be unwilling or unable to talk about their future. This can happen for a number of reasons, including:

  • Incapacity
  • Fear of becoming dependent
  • Resentment toward you for interfering
  • Reluctance to burden you with their problems

If such is the case with your parents, you may need to do as much planning as you can without them. If their safety or health is in danger, however, you may need to step in as caregiver. The bottom line is that you need to have a plan. If you’re nervous about talking to your parents, make a list of topics that you need to discuss. That way, you’ll be less likely to forget anything. Here are some things that you may need to talk about:

  • Long-term care insurance: Do they have it? If not, should they buy it?
  • Living arrangements: Can they still live alone, or is it time to explore other options?
  • Medical care decisions: What are their wishes, and who will carry them out?
  • Financial planning: How can you protect their assets?
  • Estate planning: Do they have all of the necessary documents (e.g., wills, trusts)?
  • Expectations: What do you expect from your parents, and what do they expect from you?

Preparing a personal data record

Once you’ve opened the lines of communication, your next step is to prepare a personal data record. This document lists information that you might need in case your parents become incapacitated or die. Here’s some information that should be included:

  • Financial information: Bank accounts, investment accounts, real estate holdings
  • Legal information: Wills, durable power of attorneys, health-care directives
  • Funeral and burial plans: Prepayment information, final wishes
  • Medical information: Health-care providers, medication, medical history
  • Insurance information: Policy numbers, company names
  • Advisor information: Names and phone numbers of any professional service providers
  • Location of other important records: Keys to safe-deposit boxes, real estate deeds

Be sure to write down the location of documents and any relevant account numbers. It’s a good idea to make copies of all of the documents you’ve gathered and keep them in a safe place. This is especially important if you live far away, because you’ll want the information readily available in the event of an emergency.

Where will your parents live?

If your parents are like many older folks, where they live will depend on how healthy they are. As your parents grow older, their health may deteriorate so much that they can no longer live on their own. At this point, you may need to find them in-home health care or health care within a retirement community or nursing home. Or, you may insist that they come to live with you. If money is an issue, moving in with you may be the best (or only) option, but you’ll want to give this decision serious thought. This decision will impact your entire family, so talk about it as a family first. A lot of help is out there, including friends and extended family. Don’t be afraid to ask.

Evaluating your parents’ abilities

If you’re concerned about your parents’ mental or physical capabilities, ask their doctor(s) to recommend a facility for a geriatric assessment. These assessments can be done at hospitals or clinics. The evaluation determines your parents’ capabilities for day-to-day activities (e.g., cooking, housework, personal hygiene, taking medications, making phone calls). The facility can then refer you and your parents to organizations that provide support.

If you can’t be there to care for your parents, or if you just need some guidance to oversee your parents’ care, a geriatric care manager (GCM) can also help. Typically, GCMs are nurses or social workers with experience in geriatric care. They can assess your parents’ ability to live on their own, coordinate round-the-clock care if necessary, or recommend home health care and other agencies that can help your parents remain independent.

Get support and advice

Don’t try to care for your parents alone. Many local and national caregiver support groups and community services are available to help you cope with caring for your aging parents. If you don’t know where to find help, contact your state’s department of eldercare services. Or, call (800) 677-1116 to reach the Eldercare Locator, an information and referral service sponsored by the federal government that can direct you to resources available nationally or in your area. Some of the services available in your community may include:

  • Caregiver support groups and training
  • Adult day care
  • Respite care
  • Guidelines on how to choose a nursing home
  • Free or low-cost legal advice

Once you’ve gathered all of the necessary information, you may find some gaps. Perhaps your mother doesn’t have a health-care directive, or her will is outdated. You may wish to consult an attorney or other financial professional whose advice both you and your parents can trust.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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