Long-term care is a serious issue that will affect most people. However, it is a very difficult conversation to have and here are some of the reasons:
- Confusion – it is difficult to understand the costs and what is covered by Medicare, Medicaid and private insurance.
- Denial – Many think they will never need it, however 70% of people of 65 will need some form of care.
- Mistrust – will the company be around when they need the care?
- Discomfort – it is simply too unpleasant to think about becoming ill and needing care.
Those who have considered and purchased long-term care insurance have done so for the following reasons:
- They do not want to be a burden on their families. In fact, people are 5 times more concerned about being a burden than dying.
- They want quality care in the setting of their choice.
- They want to protect their loved ones quality of life and financial security. (49% of primary caregivers report an average lost income of 40%.
At GWE we help clients consider the risks, costs and possible solutions to this problem. Contact Keith Eig to discuss long-term care and if it’s right for you.
This is part 1 of a series discussing life insurance as personal financial security. You can find part 2 here.
The primary purpose of life insurance is the transfer of financial risk of death to a life insurance company in exchange for premium payments. This is simple in concept. However, life insurance products, contract forms and how they are designed for use are deceptively complicated.
In the simplest of terms, there are two type of life insurance policy forms: temporary coverage called term life insurance and permanent coverage.
- Term life insurance is coverage that pays a death claim if you die during the term of coverage. For example a 10 year term policy provides coverage for 10 years and terminates at the end of 10 years. Term coverage does not accrue any cash value.
- Permanent life insurance pays a death when you die. It also accumulates cash value.
The first planning tenant for personal financial security is “it is more important to have the right amount of life insurance than the right kind of life insurance.” For personal financial security, the amount of life insurance is determined by quantifying objectives for final expenses, paying off debts, educating children, replacing lost wages and family members with special needs. Then liquid assets are deducted from the quantified objectives and the gap is filled with life insurance. This gap is frequently filled with term life insurance on the theory that over a long period of time debts get paid off, children complete their education; wealth is created by savings, investments, retirement plans and business interests.
Over time, if enough wealth is accumulated then the family may have sufficient resources to self-insure their financial security and the need to life insurance may become superfluous. However, if the accumulated wealth is insufficient, then it would be prudent to continue life insurance coverage (more on coverage continuation options later).
Please contact David Wexler, CLU, ChFC, AEP to find out more about planning for Personal Financial Security
This is part 2 of a series. View part 1 here.
As tax rates on individuals and trusts increase, people are looking to life insurance as a tax preferred asset accumulation vehicle.
Life insurance is treated differently than other asset classes for tax purposes. Some of the tax treatment advantages include:
- the annual increase in cash value is income tax deferred
- a withdrawal of cash value is tax free up to basis
- policy loans are generally income tax free
- the death benefit is income tax free
Depending on the type of policy it is possible to do a tax free exchange of the accumulated cash value for an annuity that provides lifetime income.
Determining the best design and most suitable product for a client’s objectives is a process. For those looking to shield investments from current taxation or for a non-qualified vehicle to accumulate supplemental retirement income, life insurance may be worth looking at.
Please contact David Wexler, CLU, ChFC, AEP to find out more about planning for Personal Financial Security.