Insurance Alliance of
Central Pennsylvania
www.tiacp.com
What is life insurance? Life Insurance provides a payment to your survivors at the time of your death. When a person dies, there are many expenses that need to be paid. These expenses may include such items as funeral costs, burial expense, current bills, and estate taxes. 
In the case of a premature death, the expenses could also include continuing financial needs of their survivors, such as family living expenses, mortgage payments, long-term debt, and educational expenses. A life insurance policy’s primary function is to provide for these costs and expenses. The goal, of course, should be to have a sufficient amount of life insurance to cover all of these costs and a reasonable amount left over to offset unforeseen future expenses. How much life insurance should I have? Everyone’s needs and goals are unique. A needs assessment, performed by a qualified professional such as a Chartered Life Underwriter (CLU) or a Chartered Financial Consultant (ChFC), may be helpful in making these very important decisions. For simplicity, a rule of thumb often used is to maintain life insurance in an amount at least equal to five times your annual income. (This would be adjusted based on your financial obligations and your number of dependents) Are there different types of life insurance? Although there are many types of life insurance policies, nearly all are variations of two basic types: Term Life Insurance and Permanent Life Insurance. Term Life Insurance is exclusively death coverage. These types of policies are written for a specific length of time (term): one year, five year, ten year, twenty year, or thirty years for example. If the insured dies during the term of the policy, assuming the premiums are paid, the death benefit is paid to the beneficiaries. If at the end of the policy’s term the insured is still alive, the coverage either ends and no benefit is paid. Coverage may be renewed or replaced. If renewed or replaced, the premium for the new term will be adjusted higher based on the current age of the individual. We usually think of term insurance as a tool to purchase less expensive protection for a specific amount of time, to cover temporary extra expenses. (Perhaps to cover a mortgage or college expense if you were not here to provide) Permanent Life Insurance (sometimes referred to as “Whole Life”) never terminates as long as the premiums are paid. Unlike term insurance, permanent insurance builds cash value which may be available to provide funds for financial needs while the insured is still alive: financial needs such as loans, college expense or premium payments. Basic permanent life insurance premiums remain constant and do not increase with age as do the term life insurance premiums. Since term insurance is always less expensive than permanent insurance, why should I consider buying permanent insurance? Both Term and Permanent Life insurance serve as an insurance need. It is important to determine the amount and length of the need. Permanent insurance will always be there, as long as the premiums are paid. Premiums will remain constant over the course of your life. Term insurance ends at the end of the term. Premiums are then adjusted if the coverage is still needed. The premiums for term insurance will go up at an increasing rate the older you become. Permanent insurance builds cash value – term insurance does not. So which is better for me – Term Life Insurance or Permanent Life Insurance? We find that a combination of Term and Permanent life insurance is usually in the best interest of the client. Some Permanent Life Insurance is almost always a wise decision. Then add Term insurance to cover the added expenses for the “term” the expenses are anticipated. We also feel that if you can only afford term life insurance, it is better to have some term life insurance than to have no coverage. The beneficiary of your term life insurance will not care that it was term insurance. They will just care that you planned for their future and you purchased the protection. Most companies will allow you to convert Term Life to Permanent Life at some time in the future. The premium for the new policy will be based on your age at the time that you do the conversion; but most times you will not need to submit to a physical examination. What is the cost of life insurance? We need some basic information to obtain a quote. Premiums are based on factors such as age, tobacco use, height and weight, and your general health. Most companies have several rating levels based on you individual statistics. Can I wait to purchase life insurance – I have few financial obligations and do not have any dependents? Generally speaking it is best not to wait. It is always possible that by waiting your health or occupation could disqualify you for coverage or for standard rates. It is best to purchase at least a small policy while you are young and you are in good health. You may even want to consider adding a rider for purchasing additional coverage in the future. What are the major types of individual health insurance policies? There are many variations of health insurance policies. The two most common are medical insurance and disability income insurance. A third health insurance product to consider is Long Term Care Insurance. What is medical insurance? Medical insurance provides benefits for sickness and injury. The types of sickness and injury covered are typically broad, but there are always limitations. Most medical policies will provide benefits only if the procedure is medically necessary. Elected and experimental procedures usually are not covered. I am covered under a group plan, is it best to stay with that coverage? Generally speaking group medical coverage will be more comprehensive and less expensive. Group coverage is not available to everyone, so you may want to look at an individual plan. We never know when we may be hospitalized or need medical attention. There are many things to consider when choosing a health plan such as deductibles, co-payments and coinsurance. You should speak to a professional insurance agent to discuss the many options. What is disability income insurance? A Disability Income policy is designed to provide you with an income for the time you are considered to be unable to work due to an illness or injury. Your income gives you the ability to plan for the future. What would happen if your income suddenly stopped due to an illness or injury? Would you be able to maintain your current lifestyle? Would your retirement plans stay on course? Even if you have group disability insurance through your employer, it may not be enough. Perhaps you should consider an individual disability plan. Are most disability policies written the same? No they are not the same. It is important that you know the definition of disability for the policy you are considering. Two most commonly used terms are “the inability to reasonably perform the duties of your occupation” and “the inability to reasonably perform the duties of any occupation”. The definition in the policy will make a difference in the cost of the policy and when a claim would be paid. The policy with the definition of “your occupation” will cost more than the policy with “any occupation”. What should I look for in a disability income policy? First you want to purchase the protection from an agent that will service your account and be there if you need to file a claim, an agent who will understand all the options available in a disability policy. OK you have a trusted agent – now what do you need to look for? Policies will vary greatly. Most of the variations have an impact on the premium. You will need to compare the policies and not only on price. You will find that some of the variations may be very important in your financial planning. What are some of the variations that will change the premium? Besides the definition of disability, two important factors to compare are:
Not just old people need Long Term Care. A younger person could receive an injury or illness and have the need for LTC. Certainly as our population ages, Long Term Care is going to become very important. With age comes the greater probability that we will need LTC. LTC insurance is based on age at the time that you purchase the coverage, so the younger you purchase the protection, the lower the premiums. Is this something I should consider? We think everyone should at least look at the coverage. It is not right for everyone, but if you decide not to purchase the coverage, you should at least know why it was not right for you. I do not plan on going to a nursing home – so do I need Long Term Care insurance? Most of us do not plan on going to a nursing home. But even if you stay in your home, you may need some care which your family may not be able to provide. (Example – Home Health Care). Our children or caretakers are not always available when care is needed. Do you want to burden your family with providing this care? Won’t Medicare pay if I need to go to a nursing home? Medicare (Medicaid) is not the primary payer for most Long Term Care that is provided. Usually we must “spend-down” our assets first. With the new rules it is becoming harder to “Hide” assets. What will happen to your spouse if your assets are drained? Why buy Long Term Care Insurance? Why not? We buy Homeowners insurance to protect our home, car insurance for our cars, floaters to protect our valuable items, so why not LTC to protect our assets from being used to provide our long term health care? When should I purchase Long Term Care insurance? LTC is much like life insurance. The younger you are, the less expensive it is. There could come a time when you will not be able to purchase the coverage because of poor health or because of your age the price is prohibited. Who do you think should purchase Long Term Care insurance? There are many reasons to purchase LTC insurance. It could be anyone who has assets they want to protect. Anyone who would like to leave their assets as a legacy to their loved ones should consider purchasing the coverage. Anyone who does not have family available to care for their long term needs should also consider purchasing the coverage. Anyone who does not want to put their family through the emotional drain of providing for their care if funds are not available. Anyone who does not want the cost of providing their care to become the responsibility of their family members is also a good candidate for this type of coverage. We recommend that you talk to an insurance professional to see if this coverage is right for you. What is the cost of LTC insurance? There are many options available and riders that may be purchased. We would not be able to give an estimated cost without reviewing your needs and discussing the options available to you. Please call for a quote. What are some of the options available that impact the cost of the protection? There are too many options to discuss in a short questions and answers format. Some of the most common are:
What are some of the riders that impact the cost of the coverage? Again there are many but some of the most common are:
Who decides if I am eligible for benefits if I have a LTC policy? You or someone on your behalf will be asked to complete a claims form. This will include a physician’s statement and may include a statement from a nursing facility. What guidelines are used to determine my eligibility for benefits? Most Long Term Care policies determine your need when you are no longer able to perform a certain number (such as 2 of 6) of a few simple Activities of Daily Living (ADLs) without assistance. An example of these activities are eating, bathing, dressing, maintaining continence, getting in and out of bed. I am a small employer, are employee benefits available to me for my employees? Yes, most often we are able to obtain employee benefits for a group as small as two individuals. I am a sole proprietorship, am I able to get medical benefits for just myself and my family? Medical insurance is available to a sole proprietorship; please call to see if you qualify. I would like to offer my employees some benefits but right now I am not able to contribute to the cost. Are there any benefits I may offer? Yes, many of our employee benefits carriers have voluntary plans available for dental, vision, short term disability, long term disability and life insurance. May I put my medical insurance benefit on a voluntary plan? Most carriers of medical coverage want the employer to pay at least 50% of the premium. I now have group medical but would like someone to explain other plans and options available to me. I have been thinking that perhaps I should have a Broker to help me “weed” through my options, but do not know the cost involved to have a Broker. On small groups, carriers generally do not make a charge to have a Broker handle your account. You are paying the same rate whether or not you have a broker. If you are not sure if there would be a charge to obtain a broker, please call our office. If you provide the name of your current carrier, we will be able to tell you if that carrier charges extra for you to have a broker. If my company were to obtain employee benefits from your agency, would someone be able to hold employee meetings to explain the programs? I don’t understand deductibles, coinsurance and co-payments. Yes, that is part of our service to you. We will hold employee meetings to explain new programs or explain changes to existing programs. I heard that term Long Term Care (LTC) can be offered as an employee benefit. Is this something I should be looking at for my employees? I thought this was for older individuals only. Not just old people need Long Term Care. A younger person could receive an injury or illness and have the need for LTC. Certainly as our population ages, Long Term Care is going to become very important. Long Term Care insurance recently became available as an employee benefit. With age comes the greater probability that we will need LTC. LTC insurance is based on age at the time that you purchase the coverage, so the younger you purchase the protection, the lower the premiums. |
