We regularly have conversations with clients about insurance and would like to share some of the common themes with you. Given the amount of knowledge we have about our clients and the fact that we do not sell any insurance products, we feel we are in a good position to provide unbiased advice and help you get the most out of the relationship with your insurance professional.
Our discussions focus primarily on three types of insurance coverage: long-term care, disability, and life.
Disability insurance protects your income in the event you are injured and can no longer earn a living. Where Life Insurance takes care of your family when you are gone, disability insurance provides protection when you are still present but unable to work.
As with all insurance products, it is important to understand what you are buying and the situations that will qualify you to receive benefits. For example, high-end disability policies will likely pay a benefit if you are unable to engage in your “own occupation” whereas lower end policies will only pay a benefit if you cannot perform work in “any occupation.”
The role of disability insurance changes at different ages and stages of life. Please call Seth or Brian if you have any questions regarding how this type of coverage can best fit into your financial life.
There are numerous types of life insurance products available, but they generally fall into two main categories: term life insurance and permanent life insurance.
Term policies are designed to provide insurance coverage over a finite period of time. Whether to cover your children’s education, your mortgage or other financial needs, term insurance is very cost-effective, providing substantial coverage for a low cost. Once your need is gone, you can allow the policy to expire.
Permanent policies provide coverage throughout your life with the intention of providing your surviving family members with a death benefit. Depending on the policy, premiums may be fixed for the life of the policy or may change as you get older. Permanent insurance is more expensive than term insurance because the coverage lasts for a lifetime, and the policy has a cash value with a guaranteed rate of return.
Long-term care policies are designed to pay for the cost of nursing-home or home-health care for individuals with a chronic or disabling condition later in life. Eldercare is extremely expensive and long-term care insurance provides reimbursement for such costs, thus helping to protect your estate for your heirs.
Policies have changed drastically as insurance companies have become more experienced with the risks and costs. Originally, there were numerous carriers that offered a variety of policies including ones with lifetime benefits. Now, only a handful of carriers remain and, because of the high risk, new policies have benefits capped anywhere between three and seven years. Premiums for new policies are high and being raised substantially for old policies.
The cost-benefit analysis of long-term care insurance is a tricky calculation. We recommend working with insurance and financial professionals to determine if it is right for you.