Life and Long-Term Care Insurance
Insurance needs vary from person to person
We are here to help provide you with the knowledge you need to make the right decision for your unique circumstances and life stage. We realize selecting life and long-term care insurance can seem daunting and confusing. As well, it’s a depressing topic to think about. But don’t let that hold you back from making what could be one of the most important decisions.
Where do you begin? First, you’ll want to ask yourself the following questions:
When should I think about getting life insurance?
Young Adult
As a young adult, you become more independent and self-sufficient. You no longer depend on others for your financial well-being. For many young singles, life insurance isn’t a priority. Some would argue that you should buy life insurance now while you’re healthy and rates are lower. This may be a valid argument if you are at high risk for developing a medical condition later in life.
You should also consider the earnings you could realize by investing the money now instead of spending it on insurance premiums. If you have a mortgage or other loans that are jointly held with a cosigner, your death would leave the cosigner responsible for the entire debt. You might want to consider purchasing life insurance to cover these debts in the event of your death. As well, you may want to look into a life insurance policy if you are supporting a parent or grandparent or have a child before marriage.
Going to the Chapel
Married couples without children typically still have little need for life insurance. If both spouses contribute equally to the household finances and do not own a home, the death of a spouse will usually not be financially catastrophic for the other. Once you buy a home, the situation may change.
Even if both spouses have well-paying jobs, the burden of a mortgage may be more than the surviving spouse can afford on a single income. Credit card debt and other debts can contribute to the financial strain. Again, if you are caring for a parent or have children, life insurance may become increasingly important for your circumstances.
Your Growing Family
When you have young children, your life insurance needs reach a climax. In most situations, life insurance for both parents is appropriate. Single-income families are completely dependent on the income of a breadwinner. If s/he should die without life insurance, the consequences could be disastrous. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths. Dual-income families need life insurance as well. If one spouse should die, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for child care with the remaining income.
Moving up the Ladder
For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It’s important to review your life insurance coverage any time you leave an employer. Keep in mind that when you leave your job, your employer-sponsored group life insurance coverage will usually end, so find out if you will be eligible for group coverage through your new employer, or look into purchasing life insurance coverage on your own.
You may also have the option of converting your group coverage to an individual policy. This may cost you more, but may be wise if you have a pre-existing medical condition that may prevent you from buying life insurance coverage elsewhere.
Single Again
If you and your spouse divorce, you’ll have to decide what to do about your life insurance. Divorce raises both beneficiary issues and coverage issues. And if you have children, these issues become even more complex.
If you and your spouse have no children, it may be as simple as changing the beneficiary on your policy and adjusting your coverage. However, if you have children, you may want to make sure that they, and not your former spouse are provided for in the event of your death.
Your Retirement Years
Once you retire, and your priorities shift, your life insurance needs may change. If fewer people are depending on you financially, your mortgage and other debts have been repaid, and you have substantial financial assets, you may need less life insurance protection than before. It’s also possible that your need for life insurance will remain strong even after you retire.
For example, the proceeds of a life insurance policy can be used to pay your final expenses or to replace any income lost to your spouse as a result of your death. (i.e., from a pension or Social Security). Life insurance can also be used to pay estate taxes or leave money to charity.
Contact one of our CFS* Wealth Management professionals today at 303.443.4672 ext. 2240
How much life insurance do I need?
Your life insurance needs will depend on a number of factors:
- Size of your family
- Nature of your financial obligations
- Career stage
- Goals
- Current age
Here are some questions that can help you start thinking about the amount of life insurance you need:
- What immediate financial expenses (e.g. debt repayment, funeral expenses) would your family face upon your death?
- How much of your salary is devoted to current expenses and future needs?
- How long would your dependents need support if you were to die tomorrow?
- How much money would you want to leave for special situations upon your death, such as funding for your children’s education, gifts to charities, or an inheritance for your children?
- What other assets or insurance policies do you have?
- If you were to remove a primary source of income, would you be able to continue paying large bills such as day care, mortgage or college tuition?
- Do you own a small business?
Contact one of our CFS* Wealth Management professionals today at 303.443.4672 ext. 2240
What type of policy should I get?
There are two basic types of life insurance
- Term life insurance
Term life policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1-30 years and may, in some cases, be renewed until you reach the age of 95. With guaranteed level term insurance (a popular type) both the premium and the amount of coverage remain level for a specific period of time.
- Permanent (cash value) life insurance
Permanent life policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash value account. During the early ages of the policy, the cash value contribution is a large portion of the premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow – tax deferred – as long as the policy is in force. If needed, you can borrow against the cash value, minus any loans and surrender charges.
There are various types of Cash Value Life Insurance including Whole Life, Universal Life, Variable Life and Variable Universal Life, all of which have different payment and coverage plans.
What to Consider
Before deciding whether to buy term or permanent life insurance, consider policy cost and potential savings that may be available. Also keep in mind that your insurance needs will likely change as your family, job, health and financial picture changes. It’s easy to understand why people tend to put off purchasing life insurance, whether it’s time, the subject of death being boring and morbid, or not knowing where to begin.
Buying life insurance is really an important task that should be addressed. Life insurance can help ensure that your family will have enough money to meet their financial obligations in the event of your death. We are here to assist you in answering questions so you can make the right decision for your circumstances.
Contact one of our CFS* Wealth Management professionals today at 303.443.4672 ext. 2240
Should you buy long-term care insurance?
The longer you live, the greater the chances you'll need some form of long-term care. If you're concerned about protecting your assets and maintaining your financial independence in your later years, long-term care insurance (LTCI) may be for you.
Who needs it?
Approximately 70 percent of Americans turning age 65 can expect to use some form of long-term care at some point during their lives. (Source: The National Clearinghouse for Long-Term Care Information, as of December 2014.) And with life expectancy increasing at a steady rate, this figure can be expected to grow in the years to come.