recommended books

Most people tend to think about their life insurance needs around the time of a major life event, such as getting married, buying a house, having a child, or losing someone they love. However, there are other times in life when you should reassess. Your 40s are a great time to take another look because goals and priorities may have shifted since you first obtained your coverage. Read on for a bit of insurance guidance and reassurance.

Taking Care of Today — Looking Out for Tomorrow
Your 40s are an exciting time of life. Personally and professionally, there’s just so much going for you, not to mention juggling multiple financial needs. There are immediate day-to-day living expenses like food, clothing, entertainment, car payments, and mortgage payments. Then there are the longer-term needs that require planning and prioritizing, such as saving for your child’s college and saving for your retirement.

These are all important and worthwhile pursuits, but they can sometimes feel overwhelming and even competitive.

Here’s the good news: Your 40s are often a time of professional growth and advancement, and usually, increases in responsibility come with increases in salary. In fact, your 40s are often the beginning of your peak earning years. So now is a great time to recalculate your coverage needs to help ensure your family’s protection is up to date and aligned with your current salary and future earning potential.

A woman walking up an incline along a dirt road.
“Your 40s are often a time of professional growth and advancement, and usually, increases in responsibility come with increases in salary.”

How Much Do You Really Need?
Many people use the classic “rule of 10” to figure out a baseline. You simply multiply your current salary by 10 to determine how much life insurance you need. However, there are other ways to assess the “right” amount. We’ve written an article, “What’s Your Number?” that offers insights into new ways to think about how much insurance you might actually need.

While term insurance is typically the least expensive, it only covers you for a set period and pays a death benefit to your beneficiary. Other types of policies provide lifetime protection as well as the potential for cash value. Regardless of which type you choose, they all come with Vitality — an innovative program that rewards you for the everyday steps you take to live a longer, healthier life. These include activities like taking a walk, eating more fruits and vegetables, meditating, and even getting a good night’s sleep.

Now What?
Sometimes, it helps to talk with family and friends to find out how others your age are handling the financial needs of living well today while also protecting tomorrow. Or better still, talk to an insurance professional — someone who can help you choose what works best for you and your family.

August 13, 2024| 6 min read

Life insurance is a crucial part of any financial strategy, helping provide security for your loved ones in the event of your untimely death. However, many people make common mistakes when purchasing or managing their life insurance policies. These errors can lead to inadequate coverage, unnecessary expenses or even denial of claims. Here are 10 life insurance mistakes and how you can avoid them.

One of the most significant mistakes people make is not purchasing enough life insurance coverage. Many underestimate the amount needed to support their family, pay off debts and cover future expenses like education costs. Read our blog to make sure you have enough life insurance coverage.

How to avoid: Calculate your needs based on your income, debts and future financial goals. Consider factors such as mortgage, children’s education and daily living expenses. Use online calculators or consult with a financial professional to determine an appropriate coverage amount.

Employer-provided life insurance is a convenient benefit, but it often provides limited coverage, typically only one to three times your annual salary. This amount may not be sufficient for your family’s long-term needs.

How to avoid: Evaluate your needs independently of your employer’s policy. Consider purchasing additional individual life insurance to supplement your coverage to help ensure your family’s financial security. Learn more in our blog about questions to ask when considering employer life insurance.

Procrastination can lead to higher premiums or, worse, the inability to obtain coverage due to health issues. The younger and healthier you are when you purchase life insurance, the lower your premiums will be.

How to avoid: Don’t wait. Purchase life insurance as soon as you recognize the need for it. The longer you delay, the more you risk paying higher premiums or facing coverage denial due to health changes.

There are various types of life insurance, including term, whole life and universal life insurance. Each serves different needs and financial goals. Selecting the wrong type can lead to inadequate coverage or unnecessary expenses. Learn more in our blog about the differences between permanent and term life insurance.

How to avoid: Understand the differences between term and permanent life insurance. Term life insurance is generally more affordable and provides coverage for a specific period, while permanent life insurance offers lifelong coverage and builds cash value. Consult with a financial professional to determine which type best suits your needs.

Life changes, such as marriage, the birth of a child or a significant increase in income can affect your life insurance needs. Failing to review and update your policy can result in inadequate coverage.

How to avoid: Regularly review your life insurance policy, especially after major life events. Update your coverage and beneficiaries as needed to ensure your policy aligns with your current circumstances.

Life insurance premiums and features can vary significantly between insurers. Accepting the first quote you receive without shopping around can result in higher costs and missed opportunities for added benefits.

How to avoid: Obtain quotes from multiple life insurance companies. Compare the coverage, premiums and policy features to find what best suits your needs. Working with a financial professional can help simplify this process.

Some life insurance policies require a medical exam to determine your health status and set premiums accordingly. Skipping the medical exam may seem convenient, but it often leads to higher premiums or limited coverage.

How to avoid: If you’re in good health, opt for a policy that requires a medical exam. This can lead to lower premiums and better coverage options. If you have health issues, work with a financial professional to find policies that offer favorable terms for your condition.

Naming an incorrect or outdated beneficiary can lead to legal complications and delays in claim payments. Common mistakes include naming minor children without establishing a trust or failing to update beneficiaries after a divorce.

How to avoid: Carefully choose and regularly update your beneficiaries. Consider naming a trust or an adult guardian if your beneficiaries are minors. Review and update your beneficiary designations after major life events to ensure they reflect your current wishes.

Every life insurance policy has exclusions and limitations that can affect claim payouts. Common exclusions include suicide within the first two years of the policy and deaths resulting from illegal activities.

How to avoid: Thoroughly read and understand your policy’s terms and conditions. Ask your financial professional to explain any exclusions or limitations. Knowing these details can prevent unpleasant surprises and help ensure your loved ones receive the benefits you intended.

Canceling a life insurance policy without considering alternatives can leave your family unprotected. Additionally, if you decide to purchase a new policy later, you may face higher premiums due to age or health changes.

How to avoid: Before canceling a policy, evaluate the reasons for your decision. If you’re seeking lower premiums, consider adjusting your current policy’s terms or coverage amount. Discuss alternatives with your financial professional to avoid gaps in coverage.

Avoiding these common life insurance mistakes can help you secure the right coverage for your needs and help ensure your family’s financial future. By understanding your needs, regularly reviewing your policy and seeking professional advice, you can make informed decisions and help avoid costly errors. Remember, life insurance is a long-term commitment and an essential part of your overall financial strategy. Taking the time to get it right can help provide financial security for you and your loved ones.

Share:

You're careful about your family’s financial health, so you’ve purchased life insurance to help ensure your loved ones will be taken care of. But life insurance policy benefits can extend beyond this main purpose. In fact, you may even be able to capitalize on your plan right now. Read on to learn about five lesser-known benefits of life insurance.

We all face the possibility of being temporarily unable to work at some point in our careers. Fortunately, if this does happen, your life insurance plan may be able to help. You can add a rider to some policies that can provide you with a monthly stipend if you’re unable to work. These riders are sometimes used in lieu of long-term disability coverage and may include the ability to waive payments until your disability is over. This can help prevent the policy from lapsing, and you can resume paying once you’re back to work.1

Similar to disability, you may be able to use your life insurance to help cover long-term care expenses. This type of benefit is traditionally added via a rider as well and may also cover costs for home health aides. Planning for possibilities like these may be a smart financial move, and can also give your family reassurance.2

If you’ve purchased a term or permanent  life insurance policy, there’s a strong likelihood that you can use a portion of the death benefit as a living benefit. This gives terminally ill individuals the ability to receive part of their payout while they are still alive. People often take advantage of this option when they have significant medical bills that need to be paid.3

You might be surprised to learn that a life insurance policy can be used to help supplement your retirement. If you choose to purchase permanent life insurance, you may be able to borrow as a loan or withdrawal against it as the policy holder. Most permanent policies have the potential to accrue “cash value” over time, and that money can be withdrawn or loaned to support as an additional source of retirement income – or you can borrow against it to help cover unexpected expenses in an emergency. It’s important to keep in mind, though, that if it comes time to pay the death benefit  on the policy before the loan is repaid, your beneficiaries will receive less than you originally planned for them.4

Most people might not immediately equate a life insurance plan with philanthropy, but your policy can aid a charity you care about. Rather than leaving money in your bank account and earmarking it for an organization in your will, you can use some of those funds to purchase a permanent life insurance policy that may enable you to ultimately make a larger donation.5

Life insurance is designed to protect your financial health in more ways than one. It’s worth looking into the different options a life insurance policy offers so that you know all the ways you and family might benefit.

We all want our families to be financially secure, especially in the unlikely event that we aren’t there to provide for them. That’s why we buy life insurance policies for ourselves. But sometimes it’s also a good move to get plans for other family members.

Keep in mind—you can’t just purchase a life insurance plan for anyone. An individual buying a policy for someone else must prove that they have insurable interest. That means that the person making the purchase is able to demonstrate that they would face financial loss and hardship should the insured individual pass away. The insurance company will ask for proof and investigate the relationship between the beneficiary and insured before signing off on the policy.1

Additionally, in order to take out a life insurance policy on someone else, you have to get their consent. They must be willing to cooperate throughout the application process (even if you’re the one paying for the policy). This typically includes agreeing to a medical exam as well as answering application questions themselves. If they are unwilling to participate in any step, you will not be able to take out a policy on them.2

So, which family members might you consider purchasing a plan for? Here’s a quick breakdown to help you decide:  

Purchasing life insurance for a spouse is generally considered a smart move. Many people opt to secure coverage for their family’s primary breadwinner. That way, in the wake of a premature death, they are able to replace the lost income that they depend upon. But it also can be a good idea to insure a non-earning spouse as well. After all, these individuals devote a lot of energy to running a household—be it providing childcare, cooking meals, overseeing repairs, etc. In the event of their passing, it’s often necessary to pay someone to cover these tasks and services. And it might be difficult for some people to manage these unexpected expenses. An insurance payout should alleviate at least some of that financial burden.3
 

Unlike a spouse, buying a life insurance plan for a parent (or grandparent) is typically less of a priority. This is because people don’t often depend on elder relatives for financial support in the same way they do a partner. Nevertheless, there are circumstances in which it makes sense to take out a policy on your parents. Some do so in order to help ensure an inheritance for the next generation. They may also want to use life insurance money to pay for estate fees or funeral expenses, which can be quite high.4 Additionally, there are times when the surviving parent is unable to live alone. The funds from a life insurance policy can be used to move them into an assisted living facility or to pay for necessary aides.5
 

Most families don’t depend on their children for their financial well being. So why would anyone buy life insurance for their child? Well, some parents do as part of a broader financial plan to pass wealth to their dependents. After all, some policies have a cash account that grows over time (though there may be better investment vehicles to build their college fund/nest egg). They might also be motivated to lock in a plan at a lower premium. This is especially true for parents who have children with medical conditions. These individuals often purchase a plan while their child is still a minor to ensure that their son or daughter has coverage when they reach adulthood.6
 

It’s definitely less common for someone to take out an insurance policy on a sibling. After all, you’re not as likely to have insurable interest on your sister or brother. However, there are cases where it makes sense to consider. For example, say your brother has taken on the responsibility of caring for your parents. A life insurance policy would help you cover costs of elder care should he pass away unexpectedly.7 Similarly, if your sibling has chronic health issues or disabilities or if they’ve faced long-term unemployment, the money you receive would help cover any expenses they leave behind.8
 

Discussions about life insurance are an important part of your regular financial planning. Taking time to consider family members for whom you might want to purchase a policy can help ensure your family’s financial wellbeing in the face of the unexpected.

Citations:
 

1 ValuePenguin: “What is Insurable Interest in Life Insurance?” by Sterling Price, September 17, 2020 https://www.valuepenguin.com/insurable-interest-life-insurance
2 Policygenius: “Can you take out a life insurance policy on someone else?” by Nupur Gambhir & Rebecca Shoenthal, December 7, 2020  https://www.policygenius.com/life-insurance/can-you-take-out-a-life-insurance-policy-on-someone-else/
3 Nerdwallet: “Find the Best Life Insurance for Your Family” by Georgia Rose, May 29, 2020 https://www.nerdwallet.com/blog/insurance/family-life-insurance/
4 Nerdwallet: “Find the Best Life Insurance for Your Family” by Georgia Rose, May 29, 2020 https://www.nerdwallet.com/blog/insurance/family-life-insurance/
5 Money Under 30: “Buying Life Insurance For Your Parents? - Here's What You Need To Know” by Shanah Bell, October 20, 2020 https://www.moneyunder30.com/buying-life-insurance-for-your-parents
6 Policygenius: “Should you buy life insurance for children?” by Jeanine Skowronski & Patrick Hanzel, CFP, July 24, 2020 https://www.policygenius.com/life-insurance/life-insurance-for-children/
7 Policygenius: “Can you take out a life insurance policy on someone else?” By Nupur Gambhir & Rebecca Shoenthal, December 7, 2020 https://www.policygenius.com/life-insurance/can-you-take-out-a-life-insurance-policy-on-someone-else/
8 Life-Wealth-Win: “Can I Get Life Insurance on My Siblings?”

September 20, 2023| 9 min read

Finding the perfect gift for the young children in your life can be overwhelming and difficult. You want something that’s meaningful. Something they will remember months, or even years, from now. Here’s an idea you may not have thought about: life insurance.

While it’s not a typical gift, buying a permanent life insurance policy on the life of a child can help establish a foundation for a lifetime of financial security. Let’s review some of the benefits of buying life insurance on children.

Protection. The policy you buy for a child today can still be there years from now, providing death benefit protection for this child’s own spouse or children.

Accumulation potential. A permanent life policy can build tax-deferred cash value over time that your loved one can access for things like:

• Funds to help with college expenses.
• A down payment for a new home.
• Money to start a new business venture.
• Supplemental income for the child’s own retirement decades from now.

Tax advantages. When accessed through policy loans and partial withdrawals, the life insurance policy’s cash value can be used with potentially no tax consequences. The policy death benefit is generally paid tax-free to beneficiaries upon the death of the insured.1

Low premiums. Premiums for life insurance on a child are often much lower than those for adults. With permanent life insurance, it’s possible to lock in the premium at the child’s current age—for life. Once the life insurance policy is issued, coverage cannot be canceled if the required premiums are paid.

Protecting insurability. These policies can be kept after a child becomes an adult — throughout his or her lifetime — regardless of health status. 

There’s a chance a child could develop a chronic or terminal illness, such as diabetes, cancer or heart disease, especially if there’s a family history. This would cause a higher rating on life insurance, making it cost more. Purchasing life insurance for a child can lock in their insurability at a young age, ensuring they have coverage in place even if they develop health issues later in life that might make it more difficult or expensive to obtain coverage.  

Added flexibility. There are many unexpected events besides death that can cripple a family’s finances in a hurry. That’s why living benefits riders are available on many life insurance policies. That means if your child is diagnosed with a chronic, critical or terminal illness, they can receive a part of the policy’s death benefit while they’re still living, giving them more options to deal with the financial strain of a future medical condition. 

This hypothetical example illustrates how purchasing life insurance as a gift to grandchildren helps you leave a legacy to support your loved ones’ financial responsibility and protection.

The scenario

Mi Kim understood the value of life insurance. When her husband passed away from a heart condition when he was only 49, she was grateful for the life insurance they had in place. Her husband had run their family business and was their family’s primary bread winner. Without his life insurance, she didn’t know what she would have done. The life insurance death benefit gave her the money she needed to pay her husband’s hospital and doctor expenses, as well as his funeral costs. It gave her money to pay off their mortgage so she could keep their family home and still pay for their kids’ college education. It also gave her the funds to hire someone to manage the family business while she got her life back in order. She always encouraged her two children to make sure they had enough life insurance in place to protect their families in case anything tragic and unexpected happened to them.

Several years later, Mi wanted to provide a meaningful gift to her two grandchildren, Annie age 3 and Kevin age 1. She would still buy them toys and clothes to commemorate special occasions, but she also wanted to give them something special they would remember for the rest of their lives. She decided to buy them each a 10-pay whole life insurance policy. She liked the idea of protecting their insurability, in case their health changed as they grew up.

She also liked the idea of providing them with a financial safety net, knowing that the cash value of the policies could be used for a variety of reasons, such as college, their wedding or even their own retirement. After 10 years, the policy will be paid for, so she won’t be burdening her loved ones with future premium payments.

Protecting insurability

As Mi’s granddaughter, Annie, grew up, she didn’t understand the value of the life insurance her grandmother bought for her. She didn’t really need life insurance yet, but since it was paid for, she just filed it away and forgot about it.

After Annie gave birth to her first child, she began to see the importance of making sure her child was financially protected. However, when Annie was pregnant, she developed gestational diabetes. The disease developed into type 2 diabetes after she gave birth, making new life insurance policies much more expensive than before she was diagnosed with the disease.

She took another look at the whole life policy her grandmother had bought for her almost 30years prior. She was surprised to see that the death benefit was close to what she and her husband thought they needed. Thankfully, because of her grandmother’s thoughtfulness, she didn’t need to buy added coverage.

Money for the future

After hearing about Annie’s experience, Mi’s grandson, Kevin, was curious about the policy his grandmother had bought for him. He already had life insurance coverage through his job, but he and his wife were planning on buying their first home and he thought he might need to increase his coverage. This policy filled the gap. He was also surprised to see the cash value that had built up in his policy. He and his wife decided to take a policy loan on the cash value to cover the down payment on their house, preserving the money they had in savings. He was thankful his grandmother had the foresight to provide him with this extra financial security.

Ownership. When buying a life insurance policy for a child, it’s generally owned by the purchasing adult. When the child becomes a legal adult, ownership can be transferred to them.

Beneficiary. The beneficiary is the person or persons who would receive the death benefit of the policy. Generally, this is the child’s parent or guardian. When the child becomes the owner of the policy, he or she can name another beneficiary if they wish.

Premiums. There are a variety of ways to pay for life insurance on a child.

• 10-pay: You could decide the premium you’re willing to pay, or the death benefit amount you want and pay for a whole life insurance policy over 10 years. This shorter payment period, after which the policy will be paid-up for life, means your loved ones won’t be burdened with ongoing premium payments.
• Lump sum: Instead of giving a child a cash gift, you could use that sum, perhaps $10,000 and buy a life insurance policy for whatever death benefit amount that sum would buy.
• Ongoing premiums: You could also select the premium or death benefit wanted and make the scheduled premium payments.

You can also take advantage of the annual gift tax exclusion when buying life insurance for a child, since the life insurance premiums you would be paying are considered a gift to the child. The annual gift tax exclusion allows you to give a certain amount of money to another person each without incurring any gift taxes. By gifting assets during your lifetime, you can reduce the size of your taxable estate and any potential estate taxes that might be owed upon your death. You may want to consult your attorney or other tax professional for more information.

Underwriting. Medical and financial guidelines are a little different when a child is the insured. Generally, there are fewer medical requirements for insured’s up to age 17 and allowable coverage amounts are limited by the parent’s amount of insurance. Also note, one parent’s signature is needed when applying for coverage.

Learn more to see which option is right for your financial strategies. 

Share:

August 14, 2024| 6 min read

Estate planning is essential for everyone, regardless of the size of the estate. Life insurance plays a crucial role in various aspects of estate planning, helping provide financial security to your loved ones. Here are 10 ways to use life insurance in estate planning for modest estates.

Some states impose estate or inheritance taxes on estates as low as $1 million. Even if your estate falls below the federal estate tax exemption, state-level taxes can still take a significant portion of your assets. Life insurance can be used to protect the assets you have worked hard to build, helping you pass on more to your loved ones. The death benefit from a life insurance policy can cover these taxes, preventing the need to liquidate other assets.

Life insurance is vital for protecting young families from the financial impact of an untimely death. In the event of a family member’s death, life insurance can cover:

• Liabilities remaining post-death: Any outstanding debts, including mortgages, car loans and credit card balances can be paid off using the death benefit.
• Income replacement amount & duration: The policy can provide ongoing financial support to replace the deceased’s income, ensuring that the family can maintain their standard of living.
• Funeral costs: Life insurance can cover funeral and burial expenses, which can be a significant financial burden.
• Education expenses: Funds can be set aside for children’s education, helping secure their future.

Life insurance cash surrender value and/or the death proceeds can be protected from creditors, with state-specific variations. In many states, the proceeds are protected if the beneficiaries are spouses, children or other dependents. This protection ensures that your loved ones receive the intended benefits without interference from creditors.

Probate can be costly and delay your loved ones from accessing the money they need. The probate process can take six to nine months or longer, during which your assets are tied up in legal proceedings. Life insurance can help you avoid probate because the death benefit is paid directly to the named beneficiaries, allowing them to access the funds immediately and bypass the probate process.

Life insurance can simplify estate planning in second marriages, especially when children from previous marriages are involved. It allows the insured to provide for a current spouse while ensuring children from previous marriages inherit directly. This arrangement helps balance the needs of both the spouse and children, avoiding potential conflicts and ensuring fair distribution.

Life insurance can equalize estates where family businesses or other significant assets complicate equal distribution among children. If one child inherits a business or property, life insurance can provide an equivalent amount to other children, ensuring fairness. This approach helps prevent disputes and maintains family harmony.

Traditional retirement plans are effective for wealth accumulation but inefficient for wealth distribution due to double taxation. If much of your wealth is tied up in tax deferred assets, such as a 401(k) or IRA, it could be fully taxed to the beneficiaries at their income tax rate when transferred to them. This tax treatment immediately decreases the net value of the inheritance. The generally income tax-free death benefit provided by life insurance can help minimize these adverse tax implications.

Life insurance can be used to leverage dollars regularly donated to a favorite charity by naming a charity as the owner and/or beneficiary of a life insurance policy. In more complex charitable gifting strategies, a wealth replacement trust may be considered. This allows you to support charitable causes while providing for your family’s financial needs.

Life insurance can reduce gift taxes when passing on a primary residence through a Qualified Personal Residence Trust. It can also reduce the taxable gift to family members using a Grantor Retained Income Trust and provide tax benefits on appreciated property gifted to charities through a Charitable Remainder Trust, with the estate’s value preserved for heirs. These strategies help maximize the impact of your charitable giving and protect your legacy for future generations.

For families with a member who has special needs, life insurance can fund a special needs trust. This type of trust ensures that the individual with special needs receives financial support without jeopardizing their eligibility for government benefits. The death benefit from a life insurance policy can be directed to the trust, providing a reliable source of funds for medical care, living expenses and other needs. This approach helps families know their loved one will be cared for after they are gone.

Estate planning is not just for the wealthy. It’s for everyone who wants to ensure their loved ones are taken care of and their wishes are respected. Learn more in our blog, Understanding the Basics of Estate Planning. Life insurance is a versatile tool that can address various needs in estate planning, from covering estate taxes and replacing income to protecting assets from creditors and avoiding probate. By understanding these 10 uses of life insurance, you can create a comprehensive estate plan that helps provide financial security for you and your loved ones.

This information is for informational purposes only. It is not intended as tax or other legal advice. For application of this information to your specific situation, you should consult an attorney.

Share:

October 18, 2023| 7 min read

Life insurance is a crucial financial tool that provides protection to you and your loved ones. Some of the most common reasons families buy life insurance are to: 

• Help replace lost wages or income.
• Cover burial and other final expenses.
• Help pay off the mortgage and other home expenses.
• Leave an inheritance.
• Provide funds towards a college education.

Life insurance provided by your employer offers a convenient way to get important coverage, which is the amount your policy provides to your beneficiaries upon your death. For many, it’s the first step in protecting loved ones from the unexpected. However, you may want to consider other options as well, such as buying your own individual life insurance policy, either in addition to or instead of your employer life insurance. Both have advantages and disadvantages which are important to look at to decide what might be the most suitable choice for your needs.

Employer insurance is offered by employers as part of their employee benefits package. It covers a group of employees under a single policy. Key characteristics of employer insurance include:

Employer-sponsored: Employers may pay for a part of the entire premium up to a certain amount of coverage. Employees usually have the option to buy added coverage at a discounted rate.

Simplified underwriting: Employer life insurance often involves a simplified underwriting experience, which means that employees may not need to undergo a medical examination or provide detailed health information. This can be advantageous for employees with pre-existing health conditions.

Limited customization: Employer insurance tends to offer limited customization options. Coverage amounts are typically based on a multiple of an employee’s salary, with a maximum limit. This may not be enough to meet all your needs.

Portability: One of the main drawbacks of employer life insurance is that it is not always portable. When an employee leaves the company, coverage may cease or become more expensive. Some policies offer conversion options, allowing individuals to convert their employer insurance to an individual policy upon ending employment.

Cost effective: Employer life insurance may be available at a lower cost than individual policies, especially when the employer subsidizes the premium. This makes it an attractive choice for those looking for more affordable coverage.

Individual life insurance is a policy bought by an individual directly from an insurance company. It provides coverage tailored to your specific needs and circumstances. Key characteristics of individual insurance include:

Personalized coverage: Individual policies usually provide the flexibility to choose your coverage amount; policy type, such as term, whole life and universal life; and added benefits called riders to suit your needs.

Comprehensive underwriting: Underwriting for individual policies may include a medical examination and a more detailed health questionnaire. This ensures that the policy is priced based on your health and lifestyle factors. However, some companies are beginning to offer accelerated underwriting for some of their individual policies, which offers a more simplified underwriting process.

Ownership and control: When you own an individual life insurance policy, you have full ownership and control of the policy. If you buy a permanent policy, you can change the amount of coverage and access the savings part of your policy. Read this blog to learn more about permanent vs term insurance.

Portability: Individual life insurance policies are portable and not tied to your employment. This means you keep coverage even if you change jobs or retire.

Cost variability: The cost of individual life insurance can vary widely based on factors such as age, health, coverage amount and policy type. While it can be more expensive than employer insurance, it offers greater flexibility and often offers more comprehensive protection.

Many employees who lose access to employer-provided life insurance hadn’t considered the consequences of tying their insurance coverage to their employment. As you look over what your options are, ask yourself these questions:

1. What if you’re in good health?

Underwriting for employer life insurance may not be as beneficial if you’re young and healthy. But the practice is considered a benefit by some people who look at employer insurance in part because they may have a hard time getting insurance on their own. Individual policies tend to have more rate classes than employer policies do, offering lower rates to people in the best of health. If you’re healthy, buying an individual policy could be just as affordable.

Underwriting process:

• Employer life insurance: Simplified underwriting, often with no medical examination needed.
• Individual life insurance: Comprehensive underwriting, including a medical examination and health questionnaire, but accelerated underwriting may also be available.

2. What if your group coverage comes at a discount?

A compelling reason people sign up for employer-provided insurance is that the coverage comes discounted or even free depending on the source. This is an attractive draw. It’s important that you still do a needs analysis to make sure you don’t need to supplement the coverage.

Cost:

• Employer life insurance: Generally, more cost-effective, especially when subsidized by the employer.
• Individual life insurance: Costs can vary widely but it offers more comprehensive coverage options.

3. What happens if you leave your job?

You may not be able to convert your employer policy to an individual policy, leaving you without coverage. If your health has changed, private coverage may no longer be affordable or available.

Ownership and portability:

• Employer life insurance: Typically, not owned by the employee and portability may be limited or costly upon leaving the employer.
• Individual life insurance: Owned by the employee, fully portable and not tied to employment status.

4. Do you have adequate coverage for your needs?

You’re not always able to select the level of coverage with employer life insurance. If there is a coverage gap, then you need to supplement your employer insurance with an individual policy. Read this blog to see if you have enough life insurance. An individual policy may also provide added options called riders, that may help meet your current and future life insurance needs.

Customization and flexibility:

• Employer life insurance: Coverage may be limited and often based on salary multiples. Maximum coverage amounts are often set.
• Individual life insurance: Coverage amounts can be tailored to your needs and may be large.
• Employer life insurance: Limited customization with little to no options for riders.
• Individual life insurance: Offers various riders that provide added protection.

When comparing employer life insurance and individual life insurance, there is no one-size-fits-all answer. The choice between these two types of insurance depends on individual circumstances, needs and preferences.

Employer life insurance can be a convenient and cost-effective choice for employees who have access to it through their employers. It provides a basic level of coverage without the need for complex underwriting, making it accessible to individuals with pre-existing health conditions. However, it may not offer the level of customization and flexibility that some individuals need.

On the other hand, individual life insurance offers customization, control and portability. It is suitable for those who want coverage tailored to their specific financial goals and circumstances. While it can be more expensive, the benefits often outweigh the cost for those seeking comprehensive protection.

Ultimately, you should carefully assess your financial situation, future goals and family needs when deciding between employer and individual life insurance. In some cases, a combination of both types of coverage may be necessary to meet various financial objectives. Consulting with a qualified financial professional can help you make informed decisions and select the most suitable life insurance strategy.

Share:

Jul 2, 2024, 2:23:48 PM | Reading Time: 5 minutes 

Early retirement is a dream for many people, but is it financially possible to accomplish this goal? Building a retirement plan and financial habits around this idea can allow a person to gain greater financial independence and head into retirement early. One way to save for the future and make the transition from work life to retirement is the Financial Independence, Retire Early (FIRE) method that encourages certain saving and planning strategies to help make early retirement a reality.

What is the FIRE movement?

The FIRE movement originated from the 1992 book, Your Money or Your Life1, and gained popularity in 2010. This lifestyle strategy focuses on frugality, investing, and saving to achieve financial independence. The core idea is to save and invest a significant portion of one’s income, in order to accumulate enough wealth to support oneself and enjoy their desired retirement lifestyle. The key principles of the FIRE movement include:

"Early retirement" doesn't necessarily mean never working again. Instead, it can mean having the freedom to choose how you spend your time, whether it's pursuing hobbies, traveling, volunteering, or working on passion projects.

Making saving and investing a top priority plays a crucial role in achieving the goal. The movement typically advocates investing in low-cost index funds and retirement savings accounts and creating a diversified financial plan that offers growth potential and guaranteed retirement income.

Keeping expenses low and avoiding overspending are fundamental aspects of the movement. This involves cutting unnecessary expenses, minimizing debt, and prioritizing spending on what truly adds value to your life.

Many pursue additional sources of income through side hustles or entrepreneurial ventures to accelerate their journey toward greater financial freedom.

This is achieved when investments, savings, and retirement income generate enough money to cover living expenses. Once this point is reached, it may no longer be needed to rely on a traditional job for income.

Habits that are part of a FIRE movement1 might make early retirement possible and support long-term financial well-being. To help you on the journey toward retiring early, it can be helpful to:

Take stock of current income, expenses, assets, and liabilities. Then calculate net worth and understand your current savings rate. This helps provide a baseline to work from and can help reveal any areas for improvement.

Set a specific number goal regarding how much money you should save to feasibly retire. It can also be helpful to set smaller goals that support achieving the larger goal in the desired timeframe.

The FIRE1 strategy encourages a person to save and invest a significant portion of their income, typically 50% or more. This can include maximizing contributions to tax-advantaged retirement accounts such as 401(k)s and Individual Retirement Accounts (IRAs), purchasing an annuity, and depositing a certain amount into savings every month.

Life is unpredictable, so it’s good to be prepared to adapt a plan as circumstances change. It’s helpful to maintain flexibility and be willing to adjust goals, timelines, and strategies to accommodate changes in your life situation or financial markets.

A key part of reaching an early retirement is to keep debt to a minimum, especially debt with high-interest rates that could be going toward retirement savings instead.

Diversifying investments can help a person take advantage of different investment and growth opportunities, protect a portion of assets from market volatility, and provide multiple sources of income.

To aid in early retirement and FIRE1 goals, having various income sources can help make sure ensure there is enough money to last as long as you do. This may include Social Security, pensions, investments, personal savings, cash value life insurance, and annuities.

Annuities are often used to round out a diversified retirement plan by providing guaranteed income for the future. Depending on the type of annuity, they can offer additional benefits as well. Some can provide a mix of growth potential and protection for retirement assets, as well as liquidity and legacy options. Most importantly, an annuity can protect a retiree from outliving their money, and with payments they can count on, it may be possible to rely less on savings leading up to or during retirement.

In exchange for a lump sum payment, single premium immediate annuities (SPIA) can provide a guaranteed stream of income that will last for a retiree’s lifetime. Certain fixed index annuities (FIA) can also offer growth potential and the option for guaranteed income for the rest of a retiree’s life. Annuities can help generate income during an early retirement without a retiree needing to withdraw from low interest bearing accounts or retirement accounts which may provide sustainable source of income while a person waits to collect on Social Security so they can maximize their benefits.

To discover ways to reach early retirement and the solutions that can help, meeting with a financial professional can help devise a personalized strategy and determine if the FIRE method is a good match. Together, you can build a plan around this goal and determine which money habits would be helpful in supporting the retirement timeline. This can also be a good time to explore how an annuity can bring more financial security to a retirement income plan and help you retire at a time that is right for you.

1. Dominguez, J., & Robin, V. (1992). Your money or your life.

 Jun 4, 2024, 3:16:32 PM | Reading Time: 5 minutes 

The road to retirement can be busy, exciting, and often emotional. Many of us dream and plan for this next chapter, but when it finally arrives, are we ready for a new reality? With a little preparation, achieving a more fulfilling and financially secure retirement is possible where all your hard work comes to fruition. Here’s a retirement readiness checklist to help make the transition to the next stage more successful.

Determining when to retire can be a big decision, so how do you know when the right time should be? Many factors can influence this decision, such as having family members still dependent on a worker’s income, wanting to pay down debt, or when a couple wants to retire together.

A retirement timeline can also be influenced by Social Security eligibility and the age at which you can begin claiming benefits, as well as the age at which you can begin withdrawing from any retirement accounts. Once you reach a certain age, retirees are required to take required minimum distributions (RMDs) from certain qualified retirement savings accounts like 401(k)s and traditional individual retirement accounts (IRAs).

Often, people are mentally prepared for retirement but may not be financially prepped for the next chapter. Part of choosing a retirement date can include evaluating outstanding debt, retirement accounts, personal savings, and investments to see if there is enough income for the years ahead. To help determine financial readiness, it’s good to calculate expected expenses, including healthcare costs, and compare that number to retirement savings and projected income. To retire confidently, it can be helpful to consider:

•  Retirement goals and aspirations may include traveling, pursuing hobbies, or spending time with family. Ensure a financial plan aligns with these retirement goals.
•  Social and emotional readiness, including social connections, relationships, and support systems. Consider how you’ll stay active and fulfilled in retirement.
•  Physical health and overall well-being are used to determine if one is physically and mentally prepared for retirement, including healthcare needs, insurance coverage, and access to quality healthcare services.

With a retirement date in mind, it’s time to organize things and set up for success. Here are some steps for getting started you may want to consider:

This can include planned expenses like utilities, food, transportation, and unexpected costs like rising health care or long-term care. Will certain expenses be eliminated in retirement? Will new ones be introduced?

Determine if you want to age in place, downsize your home, or relocate to be closer to family. Moving to a smaller home to reduce living costs may make more financial sense, or perhaps the mortgage is paid off, and staying put is a better choice.

See if they need to be updated to reflect your future plans. Changes in health, career, family, and the market can all potentially affect financial goals and a retirement plan. Retirement may also introduce new goals like travel, relocation, or funding a grandchild’s education.

Estimate how much income will be available once retirement begins. This can include employer-sponsored retirement plans, annuities, pensions, investments, and other savings.

Once income and expenses are estimated to determine ways to cut back spending, identify any gaps, and determine whether certain spending categories will be added or eliminated once retired. A budget is essential to sustaining a retirement lifestyle and ensuring financial goals remain on track.

Reflect on personal values and goals and thinking about what you want to achieve and experience during retirement. Retiring can sometimes mean letting go of a previous identity tied to a career or earlier life stage, so it can be helpful to explore what interests and activities sound appealing for the future. Perhaps that includes volunteering, learning new skills, or getting more involved in the community.

Together, you can ensure there is enough retirement income to sustain your desired lifestyle and potentially discuss supplemental retirement income streams like an annuity.

Such as wills, power of attorney, and healthcare directives, to reflect current wishes. Ensure beneficiaries on retirement accounts, life insurance and other accounts are up to date.

Since each person’s dreams and goals for the future are different, the checklist can be tailored to meet those individual needs. Transitioning to retirement can involve changes in routines, financial requirements, and day-to-day activities. Proactively preparing for these changes can make the adjustment to retired life easier and help you feel more confident that you’re financially and emotionally prepped for the years ahead.