Insurance

Life Insurance

The importance of life insurance cannot be overstated.  Ask yourself this, “If I were to die tomorrow, how would my spouse replace my income?  Would my children be taken care of?”   If the answer is, “I don’t know!” it’s time to purchase life insurance.  But which kind:  Cash Value (Whole Life, Universal Life and Variable Life) or Term?  

The answer is term life insurance.   Term life insurance, simply put, will pay the beneficiary the face value of the policy upon death of the insured.   If you are the insured and you have a $250,000 policy, the beneficiary would receive a check for $250,000 upon your death.  Term life insurance can be purchased from a term of 1 year to a term of 30 years.  Term life insurance policies are very inexpensive.

Whole life insurance is an insurance policy combined with an investment element.   There is a face value on the policy, say $250,000, paid to beneficiary upon death of the insured, along with a savings feature.  For high fees and commissions you get a forced savings plan with a horrible rate of return.  Whole life insurance policies are just too expensive.

Here is an example of why you should purchase a term policy:

A 40-year-old male, non-smoker, can purchase $250,000 universal life policy for about a $3000 annual premium or a $250,000 20 year term policy for $350 annually.
If you took the difference between the  $3,000 a year you would pay for a universal life policy and the $350 you would pay for term policy, you’d have $2,650.  If you invested  that difference, assuming a 10% rate of return,  you would have over $45,000 after 10 years, over $167,000 over 20 years and over $450,000 after 30 years.  You'll have a life insurance policy that will pay a death benefit as well as the money invested over the course of the policy's term.

Here’s the kicker, when you die, the cash value you built while you owned the cash value policy does not go to the beneficiary!!!  The beneficiary gets the face value of the policy and the insurance company uses the cash value that was built up to pay the face value of the policy.   And yes, the insurance company keeps anything above the face value of the policy.  

The take away is to buy term and invest the difference.  By the time your term policy is up, you’ll have enough in the bank to be “self-insured”.                      


Disability Insurance                

What would happen if you were to die tomorrow?  About half of Americans have protected their families if this were to happen. What would happen if you were to become disabled?  Would you be able to put food on the table; pay the mortgage; keep the lights on; put gas in the car?  Unfortunately, roughly 75% of us are not protected against disability.

According to disabilitycanhappen.org:

• Just over 1 in 4 of today's 20 year-olds will become disabled before they retire.
• Over 36 million Americans are classified as disabled; about 12% of the total population. More than 50% of those disabled Americans are in their working years, from 18-64.
• A typical female, age 35, 5’4", 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
• A 24% chance of becoming disabled for 3 months or longer during her working career;
• with a 38% chance that the disability would last 5 years or longer,
• and with the average disability for someone like her lasting 82 months.
• If this same person used tobacco and weighed 160 pounds, the risk would increase to a 41% chance of becoming disabled for 3 months or longer.
• A typical male, age 35, 5’10", 170 pounds, non-smoker, who works an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
• A 21% chance of becoming disabled for 3 months or longer during his working career;
• with a 38% chance that the disability would last 5 years or longer,
• and with the average disability for someone like him lasting 82 months.
• If this same person used tobacco and weighed 210 pounds, the risk would increase to a 45% chance of becoming disabled for 3 months or longer.

As you can see, people become disabled more often than you might have thought!

When you are shopping around for disability insurance you’ll want the policy to include:

• A payout of 60% of your gross income. Typically, an insurance company will cover as much as 60% of your income.
• Coverage that lasts until age 65 when your retirement benefits will kick in
• “Own occupation” coverage.  “Own occupation” pays you if you can’t do your current job as opposed to “Any occupation” which pays you if you can’t work at all.
•  A 60 to 90 day waiting period before your benefits begin (a longer waiting period can lower your premium). 
•  A guaranteed renewable policy.  This means that as long as you pay your premium on time your coverage will not change until your termination date of the policy.

Believe it or not, accidents are the cause of most disabilities.  With improved medical care the leading killers, cancer, heart disease and stroke are now among the leading causes of disability. 

Please, protect yourself and your family!  A study by the Housing and Home Finance Agency of the U.S. Government found that 48 percent of home foreclosures were the result of disability and another study, by Harvard University, revealed that in a review of bankruptcy filings disabling medical problems led to nearly half of the bankruptcy filings in 2001.