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Using Life Insurance for Estate Planning Purposes

walter — Fri, 04 May 2012 14:41:31 +0000

There are many different ways that people do their estate planning. Generally speaking, estate planning is how a person plans to pass on their accumulated wealth to family and heirs after they die. A significant amount of wealth can be passed along by naming beneficiaries to their investment accounts, 401(k)s and IRAs, by writing a well, as well as holding homes and other real property jointly with whomever the property should pass to.

Another important way of estate planning, although it’s often overlooked, is using a life insurance policy for estate planning purposes. Some types of life insurance policies even have an investment or “cash value” to supplement the “death benefit” that is the hallmark of every life insurance policy.

Here is some insurance advice to consider about using life insurance for estate planning purposes.

Term Life Insurance. Note that term life insurance policies do not have investment or “cash out” value. Instead, term life insurance policies provide a specified amount of coverage for a pre-determined length of coverage. But so long as the insured individual keeps a term policy in effect, there will always be a death benefit that will be paid to that person’s heirs or estate.

Whole Life Insurance. Whole life insurance policies are perhaps the most common way to incorporate life insurance into an estate plan. There are many different variations on whole life insurance policies, but they generally incorporate several common elements. One of these elements is that those policies have an investment element which allows the insured to borrow against their policy, which means that the insured has additional ways to invest for the benefit of their heirs. Of course, whole life insurance policies also have death benefit elements, which means that there will be assets that will pass to the insured person’s estate upon the insured person’s death.

Universal Life Insurance. Universal life insurance coverage is similar to whole life insurance, with an additional level of flexibility in that the insured party has the option of changing their coverage amounts and types from time to time. Some universal life policies also have something resembling an annuity benefit so that the covered party’s beneficiaries can receive a guaranteed monthly income amount. Universal life insurance also has traditional death benefits.

Other Considerations. Of course, depending upon your life situation, you might only want to keep life insurance for so long as you have children that are directly dependent upon you for financial support. For example, if your children have graduated college by the time you’re 45 years old, you might decide that rather than continuing to pay life insurance premiums, you’d find it better to invest those amounts to benefit your future heirs.

Regardless of how you incorporate a life insurance policy into your estate planning, make sure to take a broad view of your estate planning, and balance the benefits of your life insurance policies with your other estate planning elements.

What is Medicare Advantage?

walter — Tue, 17 Apr 2012 14:18:23 +0000

The Medicare program was added to the Social Security program in 1965 to ensure that older Americans receive adequate health care services, regardless of whether they are insurable or can even afford their own private insurance. Since the Medicare program came into being there have been a number of different changes and modifications to its scope.

One relatively recent change is the Medicare Advantage program, which became part of the Medicare program in 2003. A prior version of Medicare Advantage, previously known as “Medicare+Choice,” actually came into being in 1997.

Here’s a basic overview of the terms of the Current Medicare Advantage program, and how it differs from traditional Medicare coverage?

Original Medicare Overview. Traditional Medicare coverage includes a component for in-patient hospital stays, as well as some types of nursing home and hospice care. This coverage is known as “Part A.” Original Medicare coverage also includes a component for certain types of doctor’s services, outpatient care and medical supplies. This coverage is known as “Part B.” There are deductible and coinsurance payments due for certain covered services, and the retiree must also pay a monthly premium for the Part B coverage. Services may be rendered at any hospital or facility that accepts Medicare reimbursement.

Medicare Advantage Overview. In contrast to traditional Medicare coverage, a Medicare Advantage Plan is much more similar to private insurance coverage. Medicare Advantage covers both Part A and Part B-type insurance, and a covered individual will select coverage that’s provided by a private insurance company which has been approved by Medicare. With Medicare Advantage a covered individual must use the doctors and hospitals which participate in the plan. In this way, coverage under Medicare Advantage is similar to participating in an HMO or PPO system. In addition, individuals who elect to be covered by a Medicare Advantage plan may also have to pay a monthly premium for the coverage, in addition to their Part B premiums.

Desirability of Medicare Advantage. Why would a person choose a Medicare Advantage Plan over traditional Medicare coverage, particularly when such coverage might require the payment of additional monthly premiums? First, there are a number of different insurance companies that have plans with a $0 premium (in other words, the covered individual will only be required to pay their standard Part B premiums, but nothing else). In addition, some people find that the quality of care they receive from Medicare Advantage providers is superior to what they’d get from traditional Medicare coverage. Finally, since an increasing number of hospitals and doctors are declining to participate in the standard Medicare coverage program, there may be a very limited availability of services. Medicare Advantage may simply be only way for an individual to get the health care they need.

Deciding which type of Medicare coverage is right for you can be a difficult decision. Make sure to take a look at all of the benefits and limitations of each before you decide.

Insurance Advice on Understanding a Home Insurance Policy

walter — Thu, 05 Apr 2012 15:55:53 +0000

We have a great deal of freedom to choose our own financial paths. We can decide how to invest or save – or even whether we invest or save – and how we spend the money we earn. But there are some areas of personal finance in which we are effectively required to participate or to buy certain services.

Homeowners insurance is one of those areas. For those of us who have an outstanding mortgage on our homes, our mortgage lenders require us to have adequate homeowners insurance as a condition of borrowing. Since buying insurance in those circumstances is required, let’s take a closer look at a typical homeowners insurance policy to make sure that we understand the basic parameters.

Here is some insurance advice to help you understand the basics of a home insurance policy.

Coverage Amount. Perhaps the most important element of any home insurance policy is the coverage amount. This specifies the maximum coverage that a homeowner can receive in the event of damage or complete destruction to the covered property. A larger amount of coverage will require the homeowner to pay a larger annual premium.

Scope of Coverage. Note that most homeowners insurance policies cover more than just the home structure itself. Policies will generally also cover the personal property (furniture, appliances, clothing, etc.) within the home, as well as damages that may be suffered by guests who get injured inside the property. These additional coverages are usually provided in amounts that are calculated at a predetermined percentage of the coverage amount for the home itself. For example, a policy might cover personal property losses in an amount up to 20% of the covered value of the home structure.

Deductibles. A significant factor affecting the price of your home insurance will be the deductible you select. Similar to deductibles for health insurance or auto insurance, a deductible on your homeowners policy specifies how much financial damage you are willing to pay for out-of-pocket before your insurance company will pay out on a claim. The higher deductible you select, the lower your annual premium will be.

Additional Coverages. Most homeowners policies specify certain types of claims that are either not covered by the policy, or are only covered up to a particular amount. For example, standard policy coverage for expensive computer equipment and jewelry is often capped at a fixed dollar amount. Homeowners who want additional coverage must purchase a “rider” to their standard policy, at an additional cost.

Escrow. As noted above, adequate coverage is mandatory if you have a mortgage on your home. In order to make sure that the insurance coverage is paid, your bank or lender will handle the process of actually paying the premiums. This is accomplished by adding a charge to your monthly mortgage payment, collecting that money into an escrow account, then using the funds from that account to pay the insurance premium. (The escrow account is normally used to pay your annual property taxes as well.) These amounts are generally adjusted each year as your insurance premium and other escrow charges change.

Understanding how your homeowners policy works, and what types of things are covered, is key to making the right policy decision, and being sure that you have the coverage you need.

Should You Keep Your Life Insurance Once You Are Retired?

walter — Wed, 28 Mar 2012 14:57:48 +0000

We usually purchase our first life insurance policies when we get married or when we start to have or adopt children. The main reason for getting life insurance, of course, is to ensure that the dependents of the insured person will have continued financial security after the insured individual passes away. But does that mean that once the insured person retires, and the kids have moved out of the house, that there’s no longer any need for life insurance?

The answer to that question isn’t quite as straightforward as you might think. Instead of assuming that life insurance is no longer necessary, ask yourself these questions to help come up with the answer that’s right for you.

Here is some life insurance advice you should consider once you have retired.

What Type Of Life Insurance Do You Currently Have? The two most common types of life insurance policies are Term Life and Whole Life, although there are different variations of each of those basic types. (In fact, well-known Whole Life policies are actually a particular type of “Permanent Life” policy.) If you currently have a Term Life insurance policy, then your decision of whether or not to continue it depends on whether you’re permitted to cancel the policy, what your current premiums are, when its term would expire and the state of your health. If it’s affordable and/or you anticipate a payout in the near future, you might want to keep it in place.

Life Insurance as an Estate Planning Tool. Some individuals desire to use their life insurance policies as an estate planning tool. A Term Life policy can fit into this role, but for only as long as the policy remains in effect. A Whole Life policy (or any other type of Permanent Life policy) is certainly more viable and common as an estate planning tool, because of the policy’s residual value.

Ability to Borrow Against the Policy. If you have some type of Permanent Life policy you’ll be able to borrow against your policy, or to cancel the policy and collect the surrender value. Depending on your needs you might want to consider collecting that amount and putting it to use elsewhere within your retirement plan.

How Much are You Paying for Life Insurance? If you’re currently paying on a Term policy, or you need or Permanent Life policy, you must take into account the cost of that coverage. Sometimes the cost of obtaining new coverage later in life is too high in comparison to the possible benefits you might receive.

Have You Considered a Specialized Policy? If your term life insurance coverage has expired, but you still have a balance on your mortgage, you might want to consider purchasing a specialized mortgage life insurance policy. The payout on a mortgage life insurance policy decreases in value over time (to mirror the declining balance of your mortgage as you pay it off), and can help make sure that your spouse can continue to live in your home even if you pass away before you finish paying your mortgage.

There are a number of important decisions that you’ll have to make as you enter retirement, and whether to keep your life insurance is one of them. By objectively assessing your needs, your current coverages and the costs of continuing or obtaining new coverage you’ll be able to reach the right decision for you.

What is an HSA – Health Savings Account?

walter — Mon, 12 Mar 2012 15:11:52 +0000

One interesting component of the new health care landscape that’s developed over the past decade is the level of choice individuals now have. Rather than simply take the comprehensive coverage insurance provided by our employers, as we would have done in years past, we can now choose from literally dozens of options.

But it might not always feel like having so many choices is a good thing; in fact, sometimes too many choices can feel a little overwhelming. One of these choices – the Health Savings Account – is sufficiently unique that it bears a closer look by many individuals. In short, a Health Savings Account is a tax-advantaged savings account that lets you save pre-tax dollars which you can then use to pay your qualified medical expenses.

Here is some information and advice you should consider when deciding to fund a Health Savings Account.

Tax-Deductible Contributions. Contributions to an HSA are generally exempt from federal income tax, provided that the HSA owner is covered by a particular type of health insurance plan (discussed below). The contribution limit for 2011 is $3,050 (which can be made up until the filing deadline for your 2011 return) and the contribution limit for 2012 is $3,100. If the contributor is age 55 or older, then they can also contribute an additional $1,000 per year.

A HDHP is Required. To be eligible for an HSA, you must be enrolled in a high deductible health plan” (or “HDHP”). An HDHP will provide you with fairly traditional medical coverage, and will be similar to other health insurance plans you may already be familiar with, but subject to a very high deductible. Instead of having an annual deductible of several hundred dollars, an HDHP generally has a deductible of $2,500 or $5,000 or even $10,000 per year.

Qualified Medical Expenses. Funds in your HSA may be withdrawn to pay for “qualified medical expenses,” and those withdrawals are not subject to income tax. Qualified medical expenses are generally defined by the IRS to be those expenses that you could otherwise itemize on your tax return. With a few exceptions, any withdrawals that are made for things other than qualified medical expenses will be subject to taxation plus a 20% penalty.

Unused Funds Roll Over. Unlike some tax advantaged savings vehicles (most notably, the Flexible Spending Account), any funds that are not used in a given year will roll over into the next year. In other words, there is no “use it or lose it” burden with an HSA. This allows the funds in the account to grow tax-free.

Find a Suitable HSA Custodian. Many banks and credit unions include Health Savings Accounts as part of their product offerings. These accounts will usually include checkbook access to your funds, and many also offer a debit card that you can use to pay for your qualified medical expenses.

An HSA isn’t right for everyone. If you have or are likely to have a condition that requires frequent medical attention, or if you have children, then an HSA might not be a good fit for your needs because of the high deductible with the required HDHP. But if you’re relatively healthy and have no children, then give the HSA a look.

5 Ways to Save on Auto Insurance

walter — Wed, 29 Feb 2012 16:21:15 +0000

Regardless of the type of car you drive, whether it’s old or new, or expensive or affordable, there’s one constant – you’ll need car insurance. Even if your car spends most of the time in your garage, you are legally required to have auto insurance before you can drive it on the road.

Because auto insurance is one of those expenses that’s impossible to escape (at least while you own a car), it’s important to make sure that you purchase an appropriate amount of coverage and pay insurance premiums that fit within your budget.

Here is some information and advice to help you save money on your next auto insurance bill.

Shop Around. It’s very easy to compare auto insurance rates from the major insurance companies. Most provide basic rate information online, and there are even websites dedicated to comparing multiple companies’ rates simultaneously. You might not get exact pricing information from these comparison websites (most of them do not ask for the detailed information that an insurance company will use to calculate your exact rate), but they can help you identify the two or three companies that you might want to investigate further.

Call Your Current Insurance Company and Ask For a Lower Rate. Not every insurance company automatically publishes or makes its lowest possible rates available to a given individual. Sometimes it takes the possibility of losing a customer before the insurance company offers their best possible deal. If you’ve found another insurance company that offers you a lower rate for the same coverage, call your current insurance provider and see if they can beat the rate of the other company.

Combine Insurance Coverages. Many large insurance companies offer discounted rates for individuals who take out multiple policies with them. A common technique is to obtain your homeowners coverage from the same company that provides you with auto insurance. You’ll have to compare the combined premiums (as well as making sure that the coverages are the same) to know whether you’re getting a good deal, but it’s worth the time to check.

Increase Your Deductibles and/or Lower Your Coverage. State law will require that you have certain types and certain amounts of coverage before you can legally drive your car. But you do have a great degree of flexibility in how much insurance you purchase above and beyond the legally required minimum. It might have made sense for you to purchase full replacement value coverage for your automobile when it was new, but once the value of your car drops after a few years, you can usually safely lower this type of collision coverage. You can also increase the deductible on your policy (the out of pocket amount you’ll be responsible for before the insurance company will pay out a claim) to lower your premium.

Keep Your Used Car Longer. Apart from tickets and moving violations, the thing that will raise your insurance rates the most is buying a new car. The longer you can continue driving your current car, the more you are likely to save on insurance because you’ll need less coverage.

Don’t forget that your credit score also plays a major role in how much you have to pay for car insurance. Make sure to pay all of your other bills on time and it will help to reduce your auto insurance expenses in the long run.

Do You Have Enough Homeowners Insurance To Handle What Mother Nature Does Next?

walter — Mon, 13 Feb 2012 15:33:39 +0000

Regardless of whether or not believe in the phenomenon of “global warming,” it’s impossible to ignore the recent increase in significant weather events. All across the country, the past several years have seen weather related destruction in many different forms. Hurricanes have battered the east coast, droughts and wildfires have destroyed millions of acres in the southwest and west, and extreme flooding has occurred in many places throughout the country.

Apart from loss of life, the most significant damage from this crazy weather is damage to homes. It’s therefore vitally important for you to make sure you have enough homeowners insurance in case one of these weather events happens where you live.

Here is some homeowner insurance advice you should follow to see if you have sufficient homeowners insurance coverage.

Check Your Coverage Amount. The first thing to check is that you have an adequate amount of coverage. Even though the value of many homes has fallen in recent years, if you first purchased your homeowner insurance many decades ago then you might not have enough coverage since the value of your home has possibly increased dramatically since that time (even if it’s declined in value over the past few years). If necessary, have changes made to your policy or get a new one altogether.

Consider New Weather Events. You should also verify that the scope of your coverage will cover any events that now seem a little more likely to occur. For example, many homeowners do not have coverage or flood damage because they are homes lie outside of the “hundred year” floodplain. The problem is that many parts of the country are now seeing flooding in areas that rarely (or never) flooded before. In fact, some cities and municipalities are revising their floodplain maps to take into account the new weather patterns. Similarly, you might live in a forest area that in prior decades was always green and lush, but which in recent years seems to experience more dry weather periods. So you must make sure your policy covers any fire related damage.

Take Into Account Home Improvements. Another situation that sometimes trips up homeowners is when their insurance policy does not reflect any improvements they may have made to their home since first getting coverage. Finishing your basement, adding bathrooms or updating the kitchen all need to be reflected in your homeowner insurance policy.

Verify Your Type of Coverage. In addition, make sure that your policy covers all types of damage that may occur as a result of a storm or other weather event. After the hurricanes that devastated the New Orleans area a few years ago, many insurance companies classified the damage to homes as “flood damage” and not “hurricane damage” – the former being a result of a storm surge while the latter relates to damage from the strong hurricane winds. This caught many homeowners off guard and finding that they lacked adequate coverage.

Regardless of your personal views on global warming, it’s impossible to deny that we are seeing increasing numbers of damaging weather events. It’s imperative to make sure that your homeowner coverage is enough to cover the damage that those weather events can cause.

Advice on How to Shop for Life Insurance Online

walter — Wed, 01 Feb 2012 17:22:18 +0000

Online shopping has become the preferred method for many people looking to buy different kinds of products and services. It’s difficult to deny, for example, the effect that the Internet has had on the purchasing habits of consumers of books and music. But you can also shop for plenty of other products and services online.

Perhaps surprisingly, life insurance is one of the things that you can now shop for online. But like buying just about anything else, you need to make sure that you sufficiently educate yourself about the buying process, and what you need to look for.

Here is some insurance advice to help you make the best decisions when it comes to your life insurance.

Identify Your Needs. You should know what you’re looking for in life insurance before you start searching from amongst the various options. For example, how old are you? Do you have a spouse or children? Are you now paying or do you anticipate having to pay for nursing or long-term care for a parent? Each of these factors will help you determine how much coverage you’ll need, and for how long you’ll need it. In general, the more financial obligations you have to others, the more coverage you’ll need.
Learn About Available Options. Before proceed too far in your search for life insurance, take a bit of time to learn about the options that are going to be available to you. Term life insurance remains a popular option, although whole life policies (and policies that have a “whole life” element to them) are becoming a common choice for many individuals. Term life coverage provides you a specific amount of coverage for a specific period of time, while whole life has an investment aspect that can provide you with certain financial benefits before you pass away.
Don’t Rely on a Single Website. It’s important to be objective (and perhaps even a bit skeptical) when you’re shopping for life insurance online. Many of the comparison shopping websites for insurance are run by individuals or companies with a hidden agenda; to steer you towards a particular insurance company so that they can earn a commission. These websites can still be useful for identifying insurance companies that may be worth investigating further; just don’t use comparison websites as your last or only resource.
Get Up-To-Date Quotes. Make sure that you have up-to-date quotes from each insurance company that offers products you’re interested in. Insurance companies are constantly updating their product offerings as well as their pricing. Since price is going to be one of the most important factors you use to decide between policies, you want to make sure you’re choosing a policy based on the most current price information.
Use Online Resources to Find a Human Agent. Finally, don’t discount entirely the possibility of dealing with a human agent as part of your search for life insurance. Many agents have their own websites, where you can learn more about the services and products they offer.

The life insurance market has developed to the point where it’s possible to shop for and purchase it online. When you’re armed with knowledge of what you want and what’s available, you’ll increase the likelihood that you’ll find the best policy for your needs.

Why Health Insurance Costs Continue to Rise

admin — Fri, 20 Jan 2012 15:59:34 +0000

Even as we hear the news reports of inflation numbers being relatively low, most of us are seeing the prices of many things continue to rise. Over the last year, one of the most noticeable increases has been the cost of individual and family health insurance.

In just the past year, the annual health insurance premium cost has risen approximately 8-9%. This puts the average total premium cost for family coverage over the $15,000 mark. This year’s increase continues a trend that we’ve been seeing for quite a while, even if the increases of the few years prior were much more modest. In the last decade, for example, premiums for individual as well as family coverage have more than doubled. By comparison, the average worker’s income has only risen by approximately 30% to 35%.

Here are some observations regarding the continuing escalation of medical insurance costs.

There are Many Causes for the Rate Increases. There are a number of factors that led to the big increases this year, although industry commentators and experts disagree on how big of a role each of the contributing factors played. It’s true that recent regulatory and legal requirements of the new health care law played a role, but health care costs were rapidly rising (and continue to rise) even before the law came into effect. In fact, some observers suggest that insurance companies significantly raised their rates this year, without any real justification, simply because the new laws will require them to justify any increase of over 10% beginning in 2012. In addition, the profit margins of insurers and other healthcare industry companies are at record high levels. All of these factors played some role in the rapid rise in rates.

We’re Still Paying the Increase – Just Indirectly. It’s important to note that even if we aren’t paying directly out of our pockets for the full increase in our health insurance costs, we are bearing the increased costs in other ways. Because employers pay the majority of the direct costs for these premiums, most have reacted by reducing or eliminating any wage increases. In other words, many employees are paying for the increased health care costs with lost or reduced pay raises.

Increased Costs May Change Behaviors. Any continued increases will likely lead to more changes in how workers approach to their health care coverage. In years past, because the out-of-pocket cost to employees was low, it was common for an employee (particularly one that was getting coverage for their children) to choose the highest level of coverage “just to be safe.” With workers now paying more for coverage, many are likely to take a closer look at what types of coverage they actually need, and what they are willing to pay for. In addition, more workers may choose to participate in company-sponsored wellness programs (which often trigger lower premiums) or to move to less comprehensive coverage, such as the high deductible plans coupled with healthcare savings accounts.

While industry experts and commentators continue to disagree on the exact causes for the increase, unfortunately it’s generally agreed that the rates will continue to climb in the years to come.

Advice on How to Research and Compare Insurance Policies Online

walter — Thu, 05 Jan 2012 15:36:09 +0000

Of all the expenses in your budget, one that sometimes seems the most opaque is your cost of insurance. Chances are you pay for insurance to cover your home and car, as well as health insurance and life insurance. There are a variety of options for each type of coverage, so it’s important to make sure that you have the right kind of coverage, and that you aren’t paying too much for it.

Not surprisingly, the best way to research and compare your different insurance policy options is using the Internet. There are many sites and resources available to you to help you navigate through the various choices.

Here is some advice and a summary of the steps and guidelines you should consider when researching insurance online.

Identify Your Coverage Needs. The first step in using the Internet to identify and evaluate your various insurance options is to clearly identify your coverage needs. Different insurance companies have strengths in different areas of coverage, so having a clear picture of your needs will help you identify which insurance companies best cater to those needs. You can also use the Internet to help you learn more about the available coverages (perhaps you don’t know enough about the various types of insurance), which can help you refine your own needs.

Use Comparison Websites. Sometimes the best place to begin researching specific policies is not with the actual insurance company websites themselves, but with third party “comparison” websites. These web services let you compare multiple policies from different companies, and can help you narrow down your research to just a few of those companies. It’s important to make sure not to use these comparison websites to make your final decision; some of them have financial incentives to drive you to one insurance company over another. But they can be useful in helping you to identify a few companies that might fit your needs.

Use Insurance Company Websites. To be clear, individual insurance company websites are going to be the final places where your research specific insurance policies. By going directly to the insurance company websites you can get current and exact information about each and every policy you’re interested in. In fact, the insurance company websites are likely to be the only place to actually obtain a firm quote for a specific policy.

Price for Your Situation. Be sure that any price comparison you’re doing is relevant to your situation and your needs. For example, if you’re browsing an auto insurance company website for coverage for your used car, you’re probably not going to want the maximum available coverage. You don’t want to pay for comprehensive coverage that isn’t necessary. On the other hand, if you have particular health considerations, you must be sure that any insurance policy you’re looking at has appropriate coverage to fit your needs.

It is possible to satisfy your insurance needs without using the Internet, by picking up the phone and contacting your local agents. But if you want to be more confident that you’re examining all your options and getting the best price, then go online.