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Life Insurance Overview
Life insurance is simply intended to cover the financial risk of death. In general, anyone who wants to make sure that their family does not have to change its lifestyle after his or her death needs to have it. Life insurance has several variables: duration of coverage, frequency and stability of payments,
as well as payout method and amount of coverage. You can use simple rules of thumb, but a real evaluation of your needs should take your whole financial picture into account. Most advisors recommend an amount between 5 to 10 times your salary. Feel free to contact us if you would like to find out more about developing a financial plan.
What is Life Insurance?
Life insurance, unfortunately, is sometimes marketed as something it is not. Life insurance is not an investment. Some forms of life insurance have investment components to them. However, these forms of insurance still must pay death benefits and cover the attendant risks in order to work.
What is Term Life Insurance?
Term Life Insurance covers the financial risk of death for a given number of years (term) at a level premium cost, and pays a specified death benefit, guaranteed. Term periods available are typically 5, 10, 15, 20, and even 30 and 40 year lengths. Term life insurance builds no cash value -- it is insurance only. It guards against total disruption of a family's finances upon the death of a head of household or spouse by replacing the value of a person's future income stream and/or paying funeral and estate costs.
We feel that level term is usually the best way to cover this risk due to its low cost. It is almost always better to get a longer term period upfront, when you are in good health and younger, so that you can maintain a steady and relatively low payment throughout your period of need. There is a highly competitive market to provide this insurance, so it pays to see all choices.
Lately Life Insurance Companies start offering Return of Premium Rider, very attractive for people who want to be protected for number of years (term) they choose and at the end of that term receive their premiums back. This rider usually is not very expensive.
What is Permanent Life Insurance?
If for estate planning purposes you need to make sure that you will die with a guaranteed payout, then permanent life insurance may be for you. The two most common forms of permanent life are whole life and universal life. The common feature is that the insurance will remain in force for as long as the insured lives, not just for a set term or 5 to 30 years. This means that you don't have to be worried about outliving your term insurance and then paying huge term life bills when you are old or sick (if you are able to get term life then at all).
Whole Life Insurance
Whole life insurance has a guaranteed premium and does not fluctuate. Whole life insurance breaks down into two major categories: regular issue and simplified issue.
Regular issue means that the insured must take a medical exam. People who are in good health or only in slightly bad health should select this type of whole life insurance.
Simplified issue whole life insurance is intended for people who have serious health problems. Rarely is a medical exam required. However, it is more expensive than regular issue.
Universal Life Insurance
Universal life insurance has a premium that is tied to interest rates. The premium necessary to keep the policy in force can therefore, fluctuate. However, universal life is usually less expensive than whole life.
Disability Insurance Overview
Disability insurance is a type of insurance policy that pays monthly benefits when you become unable to work because of a disabling physical or mental reason. You may be able to buy it at work or you can purchase it on your own and pay monthly premiums. There are numerous types of disability insurance, from bare-bones policies to those with options galore. Your individual coverage will determine when your benefits actually begin, how much you receive, the limitations on your coverage, and how long you can receive benefits.
Who needs disability insurance?
Disability insurance is not really intended to cover a short-term injury or illness. If you rupture a disk in your back and are out of work for two months, it's not wise to draw on disability benefits because your future premiums may skyrocket. Instead, experts advise using your savings to live on for a couple months, even selling a mutual fund or stock or two if necessary, to cover a short-term illness. In some cases, your employer might pay sick-leave benefits.
Determining whether you need disability insurance is a personal choice. You must decide how much financial risk you are willing to assume should you suddenly find yourself unable to work for an extended period. How many months can you rely on your savings? How easy will it be for you to rebuild your nest egg for your retirement years? Can your spouse's income cover the lost salary?
Your income level also helps determine your need. In general, experts say, people who make less than $30,000 or $40,000 a year don't need it. Some insurance companies won't offer coverage for people with incomes below $20,000.
Of the roughly 4 million Americans who have disability insurance, most are white-collar professionals. Some insurance companies won't cover workers in certain dangerous professions no matter how high their income, such as pilots, miners, and police officers.
Long Term Care Overview
Long-term care is the assistance provided when a person is unable to provide for himself or herself as the result of disability or a prolonged illness.
It ranges from providing personal care at home, such as bathing and dressing, to skilled nursing services in a nursing home. Long-term care is offered through home care agencies, senior centers, adult day care centers, traditional nursing homes, and retirement communities that provide ongoing care.
A long-term care insurance policy is not for everyone, but does make sense as an affordable and worthwhile form of insurance for some. It depends on your age, health status, overall retirement objectives, income and wealth, and should not cause financial hardship or force you to forego other financial needs. Whether long-term care insurance is appropriate really requires a full financial analysis. These policies are only for people with significant assets they want to preserve for family members, to assure independence and not burden family members with nursing home bills.
Understanding Long Term Care
Here are the most commonly used types of policies and their generally accepted meaning. Carriers can of course give special meaning to certain terms under their contracts, so it is important to always read the fine print. '
Skilled nursing care is needed for medical conditions that require care by specially trained and usually state-licensed nurses or therapists. It is given either during or just after the severest level of an illness, and is usually required around the clock, 24 hours a day. Skilled care can be provided in a person's home with help from practical, as opposed to registered, nurses.
Intermediate nursing care is associated with stable conditions that require daily supervision, but not around the clock care. It is less specialized than skilled nursing care, often involves much personal care, and is supervised by registered nurses. Intermediate care is often needed for many months or years.
Custodial care is intended to assist with daily living, which includes bathing, eating, dressing, and other routine activities. Special training or medical skills are not required. It is provided by unskilled nursing assistants in nursing homes, day care centers, and at home. It is often called personal care.