When it comes to life insurance, opinions tend to take precedence over the facts; term life insurance is viewed as affordable, while whole life insurance is considered secure.
Unfortunately, like most things in life, the actual situation is somewhat more complex.
Discover the truth about whole life insurance and whether or not it is the right move for your portfolio, based on these facts.
Unlike term life insurance, whole life policies are permanent.
Once the initial term is completed, term life coverage might actually become more expensive, whereas whole life tends to become more competitively priced over the long run.
All or Nothing
Whole life insurance offers a death benefit just like term life but also provides additional protection in the form of “cash value.” Unlike a term life policy that pays nothing unless you die, whole life policies allow you to recapture or “cash in” a portion of what you invested over the years.
Another attractive feature of whole life insurance is the ability to borrow from the policy in the event you need a loan. Because a portion of the money is set aside into a savings account, whole life policies are able to provide additional funds in the event of an emergency or even serious illness.
Most experts agree, if you are short on cash or need a policy for less than 10 years, term life insurance is typically the most affordable route. For those who require more than 10 years of coverage or are able to invest a larger portion of their income up front, whole life often provides valuable protection over the long term. Ask your agent for a comparative price quote demonstrating the long-term cost as well as the benefit of each policy option; you might be surprised to learn how affordable whole life insurance is when used as a financial planning tool.
One of the most frightening aspects of running your own business is the loss of income should the unexpected happen. Fortunately, small-business owners may be able to reduce the risk of financial hardship by purchasing business income insurance.
Business income insurance helps cover the cost of putting your business back together during a major interruption due to property destruction, interruption of sales or other production issues resulting from a covered loss.
Depending upon your type of business and the level of loss sustained, business income insurance may provide the cash you need to remain in operation or get back on your feet without breaking the bank. Combined with extra expense insurance, it may even be possible to cover both your normal routine operating costs and additional expenses, including investments required to keep your business in the black.
To purchase business income insurance, it’s a good idea to schedule an appointment with your insurance agent. Explain your desired level of coverage, including cash or other liquid reserves that could be used in the event of an emergency. Don’t forget to consider deductibles and other fees that must be paid in the event of a claim; it’s always better to have a little extra cash on hand than too little, especially during uncertain economic times.
Finally, keep in mind that business income insurance provides protection for needs related to the business itself – not individual living expenditures. If you don’t have at least six to twelve months of cash on hand for your personal reserves, be sure to ask your agent about coverage designed to help pay your monthly bills.
An ounce of prevention is worth a pound of cure – especially when it comes to reducing the expense of business liability coverage.
With a little planning and preparation, it’s not as difficult as you might imagine. Simply follow these steps to start saving and minimizing the ever-rising rate increases associated with insuring your business.
1. Put it into Writing: Make sure that every employee knows and understands what is expected and the proper protocol when dealing with equipment, injuries or other situations. Implement a chain of command and actually adhere to it. Research shows few small business owners have written safety policies and even fewer put them into action. Update it frequently and keep a signed copy showing that each employee has read the policy upon being hired.
2. Carefully Screen Applicants: The first step in maintaining a safe workplace is to hire safe employees. Employees with a history of substance abuse have been associated with everything from increased risk of injury to increased risk of driving accidents; worse, they typically have higher rates of tardiness and unemployment. Drug screening and testing may play an important role in minimizing the cost of liability insurance for your company. Ask your agent how much you can save by performing routine drug screening prior to hiring and/or testing for drugs in the event of an accident or injury during work hours.
3. Comparison Shop: It’s always wise to comparison shop in order to obtain the best rates, but remember that rates alone aren’t enough if the company isn’t responsive to your needs. Take the time to compare price, service and satisfaction ratings by other business owners before making a final decision. It’s a good idea to review your policy at least once each year or more frequently should you encounter a major change in staffing or other business operations.
Annuities are usually considered relatively safe investments – but in today’s environment, investors can’t help but wonder if that’s still true.
With an immediate annuity, you make a lump-sum payment to an insurance company. In exchange, the insurance company starts making a series of payments to you immediately. In regard to an annuity’s safety, there are two factors to consider:
The Safety of your Income Stream: Immediate annuities can be fixed or variable. With a fixed annuity, your money earns interest at rates set by the insurance company – which means that your income stream is safe in a volatile market environment. With a variable annuity, the insurance company puts your premiums into a “separate account,” and you decide how the company will invest those premiums – which could result in losses when times are bad. That’s why it’s important to consult an advisor about how the money in your variable annuity is invested.
The Safety of Your Insurance Company: With many financial companies failing, it’s understandable if you’re concerned about the health of your insurance company. The good news is, there’s probably little to worry about.
Your annuity is protected by a “legal reserve,” which means that your insurance company must maintain a reserve of money that equals the withdrawal value of every annuity account. If your insurance company fails and you have a fixed annuity, the payments will likely continue – though it’s possible for a court to determine that the initial interest rate is too high and lower it, which would reduce your payments. If you have a variable annuity, the payments will continue without modification, since the assets underlying your contract are separated out from the general assets of the insurance company.
So, we’d recommend that you not worry, as it’s improbable that your existing annuity will experience problems. Going forward, however, we recommend that you research the strength of any insurance company from which you’re considering buying an annuity. Your advisor can help you do so.
Purchasing an annuity involves navigating a complex maze of information – including the question of how much you should invest.
An annuity is a contract with an insurance company. You make a lump-sum payment or a series of payments to the insurance company. Your money grows tax-deferred while it is in the annuity. Then, either immediately or at some point in the future, the insurance company starts making a series of payments to you at regular intervals.
There are many types of annuities. For example, with a fixed annuity, your money earns interest at rates set by the insurance company. With a variable annuity, the insurance company puts your premiums into a “separate account,” and you decide how the company will invest those premiums depending on how much risk you want to take.
How much you should invest in an annuity is primarily a product of how much you want the annuity to pay you. And that payout – also called a settlement option – depends on many factors.
For example, if you want a stream of income for life, you will have to estimate your life expectancy in order to determine how much to invest.
You will also have to estimate the expected returns from the annuity, which can be difficult if it is a variable annuity.
In fact, analyzing all these variables can be complicated. It’s wise to consult an advisor when considering how much to invest in an annuity.
If you are in between jobs, one of the most important decisions you can make is how to obtain short-term insurance.
Many people make the mistake of thinking they can skip health insurance for a few months until landing another position. Unfortunately, it often makes a bad situation worse. Accidents, illness and other emergencies tend to crop up when you least expect them.
Fortunately, short-term health insurance options are available if you know where to look.
Compare Individual Coverage with COBRA: If you had health insurance through your employer, chances are you qualify for COBRA coverage. However, many people are surprised to find short-term health insurance for individuals to be more cost effective than COBRA, especially if they are in relatively good health without major pre-existing conditions. Don’t delay. Put in a call to your agent right away to determine the most cost-effective policy for your needs.
Select a Term: Short-term health insurance is typically sold in one-, three- and six-month increments , but there may be a limit on how many times you can renew the policy. It’s often a good idea to purchase for a longer period of time just to be on the safe side. You can always cancel the remainder of the policy if desired.
HAS: Depending upon your situation, it may also benefit you to consider a HSA, or Health Savings Account policy. Although not specifically short-term health insurance, these high-deductible policies are often quite affordable. They tend to benefit those in relatively good health who are able to afford the large out-of-pocket deductibles, as well as those with chronic health conditions who would normally experience large annual co-payments.
Additional Coverage: Don’t neglect add-on coverage just because you are in between jobs.
In fact, it might be more important than ever to make sure that you are covered against accidents or have available vision, dental and prescription drug benefits to rely upon.
While it might not seem like the most romantic part of planning a future life of matrimonial bliss, it could be one of the most important. Life insurance is an essential part of creating a future together and making sure the one you love is provided for in any situation.
The first step in purchasing life insurance is to decide on the type of policy. There are essentially two primary types: whole life and term. Whole-life insurance tends to be more expensive but has a cash value that can offset a portion of the cost of the policy. Term life insurance is more affordable but has little to no cash value at the end of the term. Most term life insurance can be purchased for one to 45 years’ duration.
Young, healthy and Non-Smoking People Get the Best Rates. Lock in the best prices while you are able. As with most insurance policies, the time to buy is when you least expect to need it.
Buy a Policy for Everyone. Even if only one person is working while the other is in college or remains home with children, it’s important to plan ahead. Consider the cost of replacing the help the other person contributes. Don’t forget to purchase enough to replace the lost income over a lifetime, not just the current level of expenditures or earnings.
Understand Taxes and other Obligations. Life insurance provided by an employer is good, but a self-purchased policy is often better. Not only does it remain in effect if you switch jobs, but it’s not taxable in the event of a settlement.
Age has its advantages, especially when it comes to purchasing auto insurance. Understand the “how” and “why” of obtaining better value when buying auto insurance with this checklist.
Maturity Matters: Auto insurance is based upon statistical data derived from millions of policyholders. In general, drivers above the age of 25 tend to have fewer accidents and get fewer tickets than do younger drivers. If you recently reached 25, be sure to ask your agent about possible discounts.
Duration of Driving: Experience consists of the actual number of years on the road – especially accident-free periods of time. You typically require a consistent driving record of at least five to seven years without tickets or other infractions to qualify for better rates.
Drivers Education: It’s never too late to learn more about good driving habits, especially if you are younger or planning to purchase a motorcycle, ATV or other form of transportation. Demonstrate your level of dedication and preparation by investing in a driver’s education course to qualify for better rates.
Safe Drivers: Of course, safety pays, especially when it comes to obtaining the best auto insurance rates. With the cost of tickets higher than ever, allow yourself plenty of time to reach your destination and keep an eye on the little things like changing lanes and coming to a complete stop at all intersections. Not only will it reduce the risk of accidents or injury, but it will help keep your insurance rates low.
Keeping your children safe has always been a top priority, so it should come as no surprise that things don’t change just because they are leaving home for the first time. Whether they move across town or across the nation, it’s important to perform an insurance checkup to weigh all available options. Ask your agent which is the best policy for your family.
Add-on. Typically the easiest solution is to extend your own homeowners policy to cover your children’s belongings. Keep in mind, however, that not every policy will provide full coverage, especially if they live in dorm rooms or other shared accommodations. Ask about riders or extended coverage policies that provide full protection.
Independent Coverage. While it may seem less affordable, independent coverage for your college student often is more cost effective than initially meets the eye. It only makes sense: your student owns less and often requires minimal coverage. Depending on the student’s assets, renters insurance may be all they need.
Umbrella Policy. Parents and students with a high net worth should explore adding an affordable umbrella policy to protect against liability claims. Since parents often assume legal responsibility for their college-aged children, it’s important to base the policy limits upon the assets of the parents – not the child – unless the child has significant assets in his or her own name, at which point a policy may become an imperative for both parties.
Extras. Don’t forget to review the limitations and restrictions. For example, it’s not uncommon to find that homeowners policies do not cover belongings in transit. You may need to purchase additional short-term insurance while your child is moving or a rider for expensive items such as electronics.
Tally the Total. Before making a final decision, take the time to obtain estimates for both scenarios. First ask your agent to quote adding coverage to your existing policy and then evaluate a comprehensive insurance package including liability coverage for your student while away from home. Remember, there are pros and cons to each, so research as much as you can.
Even if you have prescription drug coverage, chances are it pays only a portion of the total cost. Learn how to keep the costs of prescription drugs under control.
Ask for Generics: Don’t be afraid to ask your physician to prescribe a generic if it is available. The cost is often a fraction of the brand-name version.
Evaluate Efficacy: Just because a drug is new doesn’t mean it is any better than older versions. In fact, research indicates that 40% to 80% of new drugs duplicate existing drugs. Unless only the new version can meet your specific medial needs, ask your physician if an older equivalent will meet your needs instead. There is often a substantial savings to be gained by using older equivalents.
Contact the Pharmaceutical Company: Most pharmaceutical companies provide low-cost drugs to those in need of financial assistance. Many local, state and not-for-profit organizations also help cover drug-related expenses, especially for the elderly or those with low incomes, special needs or chronic health conditions that require high-cost prescriptions.
Practice Prevention: Keep the lines of communication open and practice preventative measures to stay healthy. Doing so not only will help reduce your dependence on expensive medications, but will often minimize the complications and side effects associated with prescription drugs.
One of the most important insurance decisions you can make is purchasing life insurance – it ensures that your loved ones will not suffer financial hardship in the event you are no longer there to care for them.
However, life insurance is a complex legal contract, so it’s essential to understand how to properly select a beneficiary in order to provide the needed protection and reduce the risk of extended legal battles.
Decide Who Will Be Your Beneficiary
Typically a spouse, a child or another relative is named as beneficiary, but when the designation is properly set up, a charity, a trust or even an estate can be named as the beneficiary instead. It’s also possible to have more than one beneficiary. For example, your spouse may be listed as the primary beneficiary, with the children listed as secondary beneficiaries in the event something were to happen to both of you.
Determine how much to buy based upon need. For example, a newly married couple with toddlers at home may have significantly greater need than a middle-aged couple with grown children. Likewise, a sick spouse or a child with special needs may require additional care throughout his or her lifetime. The goal is to replace the care, compensation and other essential financial measures you contribute to their lives.
Understand the Rules
Depending upon your state and individual situation, there may be legal considerations that mandate how the insurance policy is to be written. For instance, many states require a spouse to sign a waiver if he or she is not listed as primary beneficiary on a policy. Likewise, taxes and other considerations should be carefully reviewed in order to understand the implications for the prospective beneficiary.
Plan on Change
It’s important to periodically review your policy to make needed changes, especially if you have experienced a major life event such as a change of marital status or the birth of a child.
Purchasing coverage for children away at school can be confusing if you aren’t familiar with the options. Learn the ABCs of keeping your student protected with these building blocks of coverage:
A – Analyze: The first step is to analyze your current insurance policies against the needs of your child. Most students will need health insurance, automobile insurance and some type of renter’s policy. It’s also a good idea to evaluate your liability coverage to protect your family from legal claims in the event your child is involved in an accident or other liability situation.
B – Bargain: Most parents are surprised to learn how easy it can be to qualify for discounts, especially on auto insurance or for multi-policy coverage. Ask about alumni discounts, safe driving perks and other programs designed to reduce the rates of providing coverage for your child.
C – Compare: Most parents simply add riders to an existing automobile policy or extend their homeowners coverage to provide insurance for a college student. However, it may be more affordable to purchase insurance in your child’s name instead. For example, if your student owns an older make/model of automobile, the lower value of the vehicle combined with decreased liability needs often provides enhanced savings over increasing primary policies or purchasing an umbrella policy. Many colleges also provide low-cost health insurance, although you should carefully review limits and exclusions of coverage prior to purchasing, especially if your child has a pre-existing condition.
Most people shop for auto insurance after they have purchased a new vehicle, but for the best rates and biggest savings, it’s actually better to begin at the end.
Learn how to buy right to save big on car insurance costs without putting the brakes on the fun.
Shop Used Rather Than New
Not only will a used vehicle mean a slower rate of depreciation, but it’s often less expensive to insure a gently used car.
The sweet spot of savings is on vehicles roughly two to three years old and with less than 45,000 miles, although it varies considerably from car to car.
Keep Credit Tuned
Not only does good credit help reduce the cost of financing your new vehicle but insurance companies routinely consider credit score, driving record and other personal criteria in the cost of insurance.
Make it a priority to stay in shape by performing annual credit evaluations while steering clear of traffic violations in order to obtain the best rates.
Call for Quotes – Especially on Customized Cars
That super-charged engine or enhanced wheel package might look fantastic but tripping the light fantastic could cost you a bundle when it comes time to buy insurance. In fact, depending upon the type of work performed, it may negate the warranty and limit the terms of liability should damage related to the custom changes occur.
Safety Rating Rule
Perform a search for the most recent safety rating associated with the make and model of the car you are considering for purchase.
How you legally hold title to the vehicle is especially important when it comes time to purchase an auto insurance policy.
Parents or partners with poor driving records should pay special attention to how the title may impact the purchase of auto insurance.
Decoding health insurance lingo isn’t always easy but with a little planning and preparation you will soon be speaking the same language as your agent.
The first step is to understand the basic types of health care plans including:
HMO or Health Maintenance Organization. You select a primary care provider who coordinates care. Low co-payments are typical. Often the lowest cost option, HMOs only provide coverage for providers employed or contracted by the HMO.
Point of Service Plans or POS. POS plants are similar to an HMO except you act as your own coordinator for care options. Although a POS provides a greater degree of latitude in provider selection, the additional time requirements may add a layer of complexity.
Preferred Provider Organizations or PPO. PPOs are typically the most flexible care arrangements but cost varies according to whether the provider is “in-network” or “out of network”. Typically PPOs tend to be more expensive than HMO options.
Fee-For-Service or Indemnity Plans. Indemnity plans provide extensive freedom but often require larger annual deductibles before insurance reimbursement begins. Monthly insurance premiums may also be substantially higher.
Catastrophic Coverage. Often the least expensive form of insurance, many catastrophic plans require high deductibles and exclude office visits or other day-to day-medical care. The emphasis is on major medical coverage for illness or hospitalization.
Short-Term Insurance. A policy that typically is used for 30, 90 or 180 days of coverage or to bridge the gap between jobs, prior to qualifying for employment-sponsored benefits of other situations where regular insurance has lapsed for a brief period.
Health Savings Accounts, or HSAs. A relatively unknown type of plan that combines a high deductible with a special tax-exempt savings account to keep premiums low.
Whether you have a chronic health condition, work in a high-risk occupation or simply find yourself nearing those retirement years, chances are you have faced the prospect of going without life insurance.
Instead of forgoing coverage, use these tips to find affordable coverage options and protect the financial future of your family.
Low-Cost Term Life Insurance
Term life insurance is an especially helpful option for those deemed high risk. Ask about graded or high-risk policies that provide coverage for a set period of time (1 to 40 years) without a medical examination or questionnaire. Typically the shorter the term, the less expensive it is. However, the benefits of locking in a lower price over a longer period of time could become more cost-effective in the future. Take time to review your individual insurance needs to weigh cost versus duration while taking the rate of inflation into account.
Supplement your primary policy with other options such as mortgage insurance or an accidental death policy. Mortgage insurance pays the premiums on your home, while an accidental death and dismemberment policy provides coverage in the event that you are hurt or killed due to an accident. Other supplemental policies are available to pay off your credit cards, car loans or other obligations at relatively affordable rates and without the need to take a medical exam. With a little planning, it’s possible to provide meaningful coverage for your family.
Learn how to protect your property and save big on premiums with these burglar-proofing and alarm ideas.
Perform a Personalized Review. Develop a plan of action based on existing security measures and needed upgrades. Create an inventory for each door, window and room in the house. Do you have dead bolt locks? Fire alarms with battery backup? Make a note of deficiencies; then visit a store to begin your own DIY upgrades.
Contact Your Insurance Agent. Now that you have taken care of the basics it is time to contact your insurance agent for more specific information. Be sure to mention the addition of deadbolts or other first-line-of-defense security measures implemented in step one above then ask about discount levels for each of the below to determine which is the best buy for your situation.
Evaluate Options. Most security systems fall into three general categories:
- Passive DIY: This is primarily an extension of other security measures you may have already put into place. For example, enhanced security lighting along the perimeter of the property, or sirens or alarms that sound in the event of a security breech, as well as other measures designed to prevent intrusion into the home. No monitoring or notification is included. Typical insurance discounts range from 2% to 5%.
- Passive Monitoring: The advent of wireless technology combined with the Internet has created a new breed of security system within the reach of most homeowners. Security cameras along with standard alarms, locks and other devices provide passive monitoring and record the home and property with a visual backup of all activity in the event of a breech. No automatic notification is included. Typical discounts range from 5% to 10%.
- Active Monitoring and Notification: Typically provided by a third party, this type of security system is available in a wide range of pricing plans. Security monitoring may include fire, burglary and even health threats, with 24/7 surveillance and immediate emergency notification. Discounts range from 10% to 20%.
If you are like most boat owners, then you believe only the best boat insurance will do. Unfortunately, buying boat insurance can feel like navigating stormy waters when you don’t understand a few basics. Use this checklist to make sure you encounter nothing but smooth sailing when buying or renewing your boat insurance policy:
Inside or outside? Collect basic information about where and how the boat will be stored when not in use. Is it secure? Weather protected? At home? Out of state? These and other location considerations can increase or decrease the cost of boat insurance substantially.
Exclusions and limitations? Always ask about exclusions or limitations to boat insurance coverage, especially if you have custom work or a rare vintage boat. Other common clauses to specifically review include those covering liability, boat trailer coverage, and hired workers performing labor or repairs to the boat on your behalf. It is often possible to purchase additional riders to make sure coverage is adequate for your needs.
Personal property coverage? Don’t assume your personal property, fishing gear or other belongings are covered by the boat insurance. Most policies require additional coverage, or these items may fall under another policy, such as homeowners insurance. When in doubt, ask your agent.
Perils? Vandalism, wrecks and physical damage are typically covered, but what about sinking, storm damage or hail? You might be surprised to learn that it often depends on the type of boat, your usage and other factors.
Most parents dread the day their teens take to the road: high insurance rates combined with natural concern for your new driver do little to alleviate the suffering. Fortunately, you can reduce high insurance premiums while keeping the entire family safe with these rules for the road:
Ask about Good Grades and Other Discounts
Honor students and those who invest in driver education classes can instantly cut 10% to 20% from their annual premiums.
Consider Buying a Clunker Rather Than Loaning the Family Car
One of the main causes of increased car insurance is allowing your teen to borrow the family car. Rather than risk the wreck of an expensive vehicle, carefully weigh the savings of buying a safe but inexpensive car for your teen instead. The independence and insurance savings often more than compensate for the initial outlay.
Calculate the Total Cost
Having a teen driver in the home impacts the family finances in more than one way: professionals and small business owners may be especially vulnerable to increased liability in the event your teen is involved in an accident.
Remember, even though your teen may not own a lot, it is a mistake to scrimp on liability coverage. Most lawsuits will not seek damages from the teen; they’ll go after the family. Don’t risk your family’s financial future – increase the liability portion of your insurance prior to handing over the keys.
Go It Alone
Sometimes it makes more sense for teen drivers to go-it-alone and purchase an independent insurance policy, especially once they leave for college.
Different cities,vehicles, and other demographic data impact auto insurance premiums. Always obtain quotes as part of the family plan and as a stand-alone policy to determine which is the best option.
Many homeowners assume their big-ticket items like jewelry and antiques are covered by a standard insurance policy. Unfortunately, that assumption is often wrong. Most standard homeowners insurance policies provide a cap or limit on luxury items, collectibles or other expensive belongings; usually $2,000 to $3,500. Above that level, it is necessary to obtain additional coverage typically in the form of a rider or endorsement. Protect all your property by following these simple steps.
- Make a list of all “big ticket” items – be sure to include gifts, inherited items or large purchases. Common examples include works of art, collections, electronics, cameras, computer systems and jewelry.
- If you have an appraisal, be sure to include it; otherwise, photographs, receipts and other items documenting the condition of the object(s) are helpful.
- Call your insurance agent for quotes. Ask about replacement coverage as well as limitations. For example, if the item is used for business, you may need a different policy than for items retained exclusively for personal use. Items such as jewelry or collectibles may require additional coverage depending upon geographic areas – for example, when traveling out of the country or when away at college, it may be necessary to obtain a temporary policy to ensure that full protection is in place.
- Do your homework. Ask your agent if the same provider insures big-ticket items and what would happen in the event of a claim.
What you don’t know about long-term care insurance could hurt you for years to come. Everyone knows they need insurance, but even those who are diligent about other forms of insurance tend to forget about long-term care insurance until late in life. Unfortunately, that is often a big mistake. Not only does it cost more the longer you wait, but you may not even be able to obtain it once an accident or illness strikes.
What It Is
Long-term care insurance provides needed assistance during one’s later years and, even more important, also provides the type of coverage required in the event of a disability or severe illness.
Why It’s Important
Since federal Social Security disability or SSD benefits require a minimum of six months’ illness or injury prior to even applying for coverage – and it takes an average of six months to two years to obtain benefits – there is a significant gap in coverage until basic expenses are covered. Even then, the federal government plans do not cover all expenses.
According to the US Census, four out of five people will eventually experience at least six months of illness or injury that leaves them unable to provide for their own basic activities of daily living.
When to Buy It
Purchasing long-term care insurance early in life is the most affordable and certain way to guarantee your family doesn’t encounter hardship due to unexpected circumstances during your high-income years and long-term outlook.
Part of Your Portfolio
If you are the primary wage earner for your household, have no children or family members to assist during your retirement years or simply can’t count on Social Security to provide for all of your needs, then long term care insurance is a must for your insurance portfolio.
Remember, plan ahead and purchase while you are young and healthy in order to obtain the best rates.