Why Empty Nesters Still Need Life Insurance

If you think you don’t need life insurance anymore because your last child has moved out of the house, think again.

Your circumstances may have changed, but there’s a good chance your future needs may require you to maintain your life insurance policy.

Many individuals consider life insurance a way to provide for their children in the event of their early demise.

In fact, life insurance is a way to provide for financial obligations – and empty nesters have financial obligations too.

You may have a mortgage on a home or a second home, for example.

What would happen if you or your spouse died or became disabled?

Would the other be financially devastated?

If the unthinkable happens – particularly if it happens close to retirement – the living spouse may be forced to work long into his or her golden years.

That’s already happening.

According to a study conducted by the Employee Benefit Research Institute, the percentage of workers who expect to retire after age 65 increased from 25% in 2006 to 36% in 2010. Moreover, the percentage who expect to work in retirement increased to 74%.

If that’s what is necessary in the best of circumstances, what would happen in the worst? It’s a good question to ask – and life insurance may be the answer.

Life insurance can help protect your retirement savings, which will ensure that you or your spouse will remain financially secure and your estate will be passed on to your survivors in the event of an untimely death.

Before canceling or reducing your life insurance coverage, you may want to take some time to ask how it might still be relevant and then speak with your financial advisor.

Regardless of your age, there are a number of choices when it comes to life insurance, all of which can be tailored to your unique circumstances.

Long-Term-Care Insurance: When Should You Buy In?

A lot of baby boomers still haven’t given much thought to the purchase of a long-term-care insurance policy.

However, the cost of a long-term-care need could be the biggest threat to their retirement portfolios.

As of last year, the average cost of a private room in a nursing home for just one year was more than $75,000 – and it’s expected to rise this year to approximately $79,000.

Plus, with an average stay in a nursing home of just under three years, these costs can really start to make a dent in retirement assets.

So is there a good time to purchase long-term-care insurance?

According to a number of long-term-care specialists, the ideal time to purchase a policy is between the ages of 50 and 60.

Typically, this is when people are nearing the end of their working years, and with a 10-year premium pay option, the policy can be paid for, in most cases, long before the coverage is even needed.

Another reason not to wait too long to purchase a policy is because an applicant’s health will play a big factor in whether or not he or she will even qualify for coverage, as well as the premium amount if he or she does.

In fact, it’s been estimated that roughly 20% of long-term-care insurance policy applicants are turned down for health-related reasons.

Certainly, the cost of insurance plays a big part in when to apply for coverage as well.

This is because, on average, even waiting just one more year to apply can cost between 2% and 9% more – and the older an applicant is, the more the premium cost will increase for each year waited.

Although people don’t like to think about having another insurance premium to pay, the amount that long-term-care insurance could actually save a policyholder far outweighs the expense of the premium.

How Short-Term Health Insurance Can Help You Out

It is estimated that roughly 16 million Americans will purchase temporary health insurance coverage this year. That number includes:

Those who have been laid off or are between jobs and have found that the cost of Consolidated Omnibus Budget Reconciliation Act (COBRA) insurance is too much

Recent college graduates who are seeking work but have lost their student health insurance plan

Those who have lost their dependent status under the health insurance plan of their parents

Individuals who have recently been discharged from the military

Although most temporary health insurance plans stay in force for up to only 12 months, they do fill a very important gap for those who are without permanent coverage and fear that the high cost of an illness or injury could wipe out their savings – or worse.

It is important to note that most short-term health insurance policies are designed for individuals who are healthy and do not possess any preexisting conditions. These are deemed as conditions or symptoms that the applicant has had during the 36-month time period before the start of insurance coverage.

The premium cost of a temporary policy could be a lot less than most people think, due to competition within the health insurance industry.

And because these plans are often bought in one-month increments, they are easy to cancel at the end of the month when the temporary coverage is no longer needed.

5 Ways to Reduce Costly Damage from Lightning

Summer electrical storms are no laughing matter, as lightning causes millions of dollars in damage. Following are some simple steps to reduce your risk and limit damage:

Lightning Rods: Proper grounding and distribution can dramatically reduce damage during an electrical event. Lightning rods have been routinely installed on commercial properties, but it’s just as easy to have them installed in residential areas.

Surge Protectors: Without a doubt, one of the most common causes of electronic and computer failure is an electrical surge. Appliances are at risk, especially newer models with built-in computer chips and electronic components. Installation of whole-house or direct-plug-in-type surge protectors provides an important layer of protection.

Backup Files: Computer data, photographs, digital music and other files can be costly or even impossible to replace. Back up files on a regular basis. For especially valuable data, consider purchasing additional insurance to cover losses or help replace/restore lost data.

Insurance: Many homeowner policies explicitly limit or exclude losses due to electrical storms or lightning. Ask your agent about the cost of coverage for appliances, electronics and computers, as well as the data included on each. Consider a stand-alone policy for sensitive items.

Extended Warranties: Many computers, appliances and electronics provide extended warranties at the time of purchase. Some include lightning protection, while others expressly limit losses due to lightning.

Carefully read the policy prior to purchase to understand what is included.

The Financial Implications of Living Longer

Life expectancies are at an all-time high, but two-thirds of Americans underestimate how long they’ll live – which is presenting a challenge for retirement planning.

The average life expectancy is 78 years for the first time in American history, according to the Centers for Disease Control and Prevention, and for some it may be even higher.

A healthy 65-year-old man has a 50% chance of living to age 85 and a 25% chance of living to 92, according to the Society of Actuaries.

A healthy 65-year-old woman has a 50% chance of living to age 88 and a 25% chance of living to 94.

If you’re in your 60s, then, you may need your nest egg to last 30 years or more – and that can be a problem.

If you have a $1 million portfolio and obtain a hypothetical annual average return of 7%, you could spend $52,000 per year for 20 years of retirement.

But if that money needs to last 30 years, you could spend only $45,000 a year.

Despite the potential for a longer retirement, retirement-planning strategies haven’t changed much.

That’s because a good financial advisor will use asset-allocation strategies to help protect you from longevity risk.

Those strategies might include adding enough stock exposure to help your portfolio combat inflation, delaying Social Security payments as long as possible and buying a fixed annuity.

A fixed annuity can be particularly helpful because it turns a single lump-sum payment into a stream of cash that extends until death.

Moreover, this strategy is becoming more popular.

According to Beacon Research, sales of fixed immediate annuities were up 2% in 2010, to more than $8 billion.

If you’re interested in a fixed annuity, speak with your advisor.

Your advisor can help you decide if a fixed annuity is suitable for you, given your individual financial circumstances.

How Fixed Annuities Can Help You Fight Inflation

Inflation is rising, making some investors reconsider the value of fixed annuities. But fixed annuities can still play an important role in retirement planning.

A fixed annuity is a type of annuity that provides you with a specific sum of money at a fixed rate of return for a fixed period of time. You give a life insurance company a sum of money, and it gives you payouts for a certain period or for life.

Because the rate of return is fixed, it may seem as if fixed annuities would not be ideal for inflationary environments such as the one we’re experiencing today.

While the consumer price index, a widely used gauge of inflation, increased just 0.5% in March 2011, it was up 2.7% year over year. That means you need $102.70 to buy something today that cost just $100 in 2010.

Still, fixed annuities have a number of advantages, including tax-deferred accumulation and guaranteed lifetime income.

In other words, you don’t have to worry about market downturns robbing you of income.

Some types of fixed annuities may also help fight inflation.

Consider the equity-indexed annuity, which pays a minimum interest rate during market downturns while providing a bonus during upturns.

That’s not to say you should put all your money in a fixed annuity. But a fixed annuity, when combined with other inflation-fighting assets, may play an important role in a portfolio.

What Insurance Does Your Start-Up Need?

Starting a small business of your very own isn’t easy, but it is rewarding.

Studies show that small-business ownership is one of the leading methods of building long-term wealth.

Unfortunately, it’s also one of the leading causes of litigation, as owning a small business may increase personal and professional liabilities.

Proper insurance coverage, therefore, is a necessity.

Insurance protects against inherent risk, unanticipated events and even loss of income if you purchase the right policy.

Following are the most essential types of insurance for start-ups:

Umbrella Policy: An umbrella policy is one of the most affordable and essential forms of protection a small-business owner can purchase. Not only does it increase the limits of liability, but it also provides an important layer of protection for your personal assets.

Liability Insurance: Public, employee and product liabilities are major concerns to small-business owners. While an umbrella policy provides a layer of protection against your personal assets, liability coverage protects the actual business assets in the event of litigation. This is especially important because the cost of defending a lawsuit can often result in the demise of a start-up, even if the original charges are unfounded.

Health, Life and Disability: Small-business owners often delay the purchase of health, life and disability insurance, especially if they have a sole proprietorship or partnership. That is often a recipe for disaster. The success of a small business is often directly impacted by the health and well-being of the owner. Without proper coverage, an illness or injury may spell financial ruin.

Auto/Fleet Insurance: Any vehicle used in daily operations of a business should be insured via the small business. Don’t make the mistake of expecting regular auto insurance to cover the business use of a vehicle. In fact, the same applies to computers and other tools or equipment.

Business Interruption Insurance: Business can be interrupted by a number of things, including the loss of a major supplier, natural disasters or even personal injury. Start-ups are especially prone to disruption due to business interruption and often lack the necessary reserves to ride out the financial constraint. Business interruption insurance helps protect against the loss of income related to unanticipated interruptions.

Building and Equipment: Whether you rent or own your own building and equipment, the loss of a location and the need to replace or repair equipment can be costly and time-consuming. Commercial policies reduce the risk by providing valuable coverage in the event of building and equipment-related losses.

Goods in Transit: Many small-business owners are not aware of the risk to inventory or goods once they leave the office or warehouse. The reality, though, is that very few policies provide protection while items are in transit. Instead, a specialized policy is required to provide proper protection until the item is received and the insurance coverage of the other party goes into effect. Goods-in-transit insurance is especially important for small-business owners who send expensive items or large volumes of inventory via mail, cargo or other forms of distribution.

How to Be Prepared If Disaster Strikes

More than 25% of businesses that close due to a natural disaster never reopen, according to research conducted by the Insurance Information Institute. Small-business owners are especially vulnerable. That’s why disaster recovery planning for small-business owners is more important than ever. Following are some tips to ensure that you’re prepared:

Review Your Insurance Options: Loss of income and loss of use of plant and equipment are situations encountered after a disaster. Review existing policies to ensure that you have proper coverage. Most policies exclude earthquakes, fire and flooding, so it is important to purchase riders to ensure that you have full coverage.

Duplicate Data and Important Contacts: Cloud computing is making it easier to back up existing data and important contact information in a secure, off-site location, but it’s important to make sure it is performed on a regular basis and available when needed.

Implement Alternative Work Schedules and Locations: During a crisis, many members of staff may be delayed or unavailable, so it is important to plan ahead. Cross-train employees and provide several alternative forms of communication and work locations, including home, off-site offices and other alternatives. Make sure employees understand how to put the plans into use after an emergency.

Practice the Plan: Disaster recovery should be practiced from time to time. Have a written plan of communication and then actually take the time to implement it on a practice basis from time to time. Allow employees to work from home or other alternative locations, perform duties for which they have been cross-trained, and access information stored off-site.