Insurance & Annuities
Conquer Uncertainty With Confidence
Insurance policies are contracts that allow policyholders to transfer the financial risks of certain unpredictable events to an insurance company, in exchange for premium payments. Your financial plan should use insurances strategically to protect you, and your family, financially from unlikely events that may otherwise be impossible to recover from, such as death, illness, and disability. Some insurances policies can provide you with financial protection over a specified duration, while others accumulate cash value, offering additional utility such as supplementing retirement income, funding a child’s education, or providing cash for emergencies.
Generational Wealth
Life insurance helps provide your loved ones with financial protection after you die in exchange for premiums you pay to your insurer during your lifetime. Life insurance typically involves a specified death benefit, or “face value”, which is generally paid to your beneficiaries tax-free in the event of your passing. The policy’s face value may be guaranteed for your entire life or only for a specific length of time. Also, the face value may grow over the life of the policy depending on the type of policy and other factors.
Term Life Insurance
Term life insurance provides coverage for a set period of time, generally at a lower cost than permanent insurance. Many term life insurance products allow you to convert to a permanent policy. The cost of insuring oneself increases over time, so it’s important to understand your short- and long-term financial needs when you select a policy.
Permanent Life Insurance
Permanent life insurance provides you with financial protection for your entire life, as long as the policy remains in force. Because of the flexibility permanent life insurance offers, there are several types of policies you can purchase.
Whole Life Insurance
The benefits of whole life insurance include guaranteed fixed premiums, a guaranteed death benefit and guaranteed cash value growth. This means that with whole life insurance, your premiums never increase as long as they’re paid, and the policy has “living benefits,” which may enable you to access the cash value of the policy for any purpose while you’re alive.1 One thing to keep in mind when taking a distribution from a whole life insurance policy is that accessing the policy’s cash values will reduce the policy’s cash value and death benefit and increase the chance the policy will lapse.
Universal Life Insurance
Universal life insurance provides lifetime death benefit protection along with flexibility that gives you choices as your needs and finances change. It offers options such as increased or decreased coverage amounts, and premiums that you can vary based on your finances as long as there is enough money in the account to pay for the monthly insurance and administrative charges.
Variable Life Insurance*
Variable universal life introduces an investment component. You can allocate net premiums and account values among divisions of a separate account and guaranteed principal account.2 You can direct a portion of your net premium payments to any of the investment options available through the separate account depending on the particular product.
Each investment option offers a different level of risk and growth potential. Variable universal life insurance offers premium flexibility: you can skip payments as long as your policy has accumulated enough value to meet the monthly deductions. You can also add riders to your policy for an additional premium.
Your Most Valuable Asset: Future Income
A sudden interruption to your income due to an extended period of sickness or injury can have serious financial consequences. You may receive group disability benefits through your employer. However, group disability benefits are taxable if your employer pays the premiums and may not cover the variable income you rely on such as bonuses or commissions. These limitations mean that group benefits may not be enough if you are too sick or injured to work.
Modified Own Occupation
A modified own-occupation disability income insurance policy only covers you in the event that an illness or injury prevents you from working in any of the roles associated with your broader class of occupation—even if your illness or injury prevents you from performing the tasks of your specific job. If you work in an industry where pay can vary substantially from role to role (i.e., medicine, law, etc.), you may want to consider a true own-occupation policy.
True Own Occupation
True own occupation disability income insurance pays you a portion of your income (up to certain maximums) in the event that illness or injury prevents you from effectively performing the tasks associated with your job – even if you are still able, and whether you choose to work in similar or related roles. Speak with our team to discuss if this type of policy is appropriate for you.
Long Term Care
For most of us, it is unpleasant to envision a time when performing routine tasks may become difficult as the result of injury, illness or aging. If the time comes when you need substantial assistance performing daily tasks, it is unlikely you will want cost to be the primary decision-making factor for your long term care. Long term care (LTC) services can be expensive and costs generally continue to rise. Planning early can help ensure that you have more control in receiving the type of care you want — in the setting you choose, should the need arise.
What is Long Term Care?
Long term care includes a variety of services and supports to help meet personal care needs over an extended period of time. The services include help performing Activities of Daily Living (ADLs), such as: bathing, continence, using the toilet, transferring to/from a bed or chair, dressing and eating. Long term care services are generally not covered under personal health insurance or Medicare because they are not intended to cure, improve or treat a specific medical condition. Medicaid may help individuals with income and assets below state requirements.4
In some cases, family members and friends may be able to help with some of the care you need — preparing meals, providing transportation; helping with housework, bills or medication for example. Caregiving can be rewarding, but it can also be stressful. It’s important to recognize when family caregivers need a break and/or can no longer provide the care you require.
Potential Ways to Pay for Care
When professional long term care is necessary, one option is paying with your own resources such as savings, investments, income (pension, Social Security, annuities) or even your home or home equity. Consider how long these sources might last and what other goals may be unfulfilled if these funds were used for care.
Another option is insurance designed for long term care expenses, or with the option to use the policy’s primary benefits for long term care if needed. For example, your existing life insurance or annuity may contain provisions to utilize benefits early in the event you need long term care. It is important to have an insurance professional review your existing policies and carefully explain the differences in the types of coverage available today.
Finally, you may be able to qualify for your state’s Medicaid program. Medicaid only pays after you meet eligibility requirements, including specific restrictions on income and assets.4
Annuities
People are generally living longer and that means more time and savings could be spent in retirement. If you need a tax-deferred investment to provide a guaranteed5 stream of income for life or a specified number of years, it might be worth considering an annuity. An annuity is a contract between an insurance company and an annuity owner. In exchange for a purchase payment, or series of payments, the insurance company guarantees5 to pay a stream of income in the future.
Managing Your Wealth
Different insurance products can help you work toward a variety of financial goals, including retirement and estate planning, as well as education funding. You should be aware of the risk/return potential of any insruance products you consider purchasing and select appropriate insurance products based on your goals, comfort with risk, timeline, and a product’s fees and tax considerations.
Our Wealth Management Advisors can guide you through the growing number and complexity of available life insurance options. It is our job to ensure your financial plan fits your short- and long-term financial goals.
1. Distributions under the policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10 percent tax penalty if the policyowner is under age 59½.
Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
2. Guarantees are based on the claims paying ability of the issuing company or companies
3. Disability income insurance policies have exclusions and limitations.
4. For more information regarding benefits provided by Medicare or Medicaid (Medi-CAL in California) visit http://www.cms.hhs.gov. Medicaid guidelines vary by state. Contact your local Medicaid office for details
5. Guarantees are based on the claims-paying ability of the issuing company and do not apply to the investment performance or safety of the amounts held in the variable investment options.
Annuities are not appropriate for everyone. There are fees and charges associated with owning an annuity.
Annuities do not provide any additional tax advantage when used to fund a qualified plan. Investors should consider buying an annuity to fund a qualified plan for the annuity’s additional features, such as lifetime income payments and death benefit protection.
Variable annuities are sold by prospectus. Before purchasing a variable annuity contract, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity contract and its underlying investment choices. For this and other information, obtain the product prospectus and underlying investment choices prospectus from your registered representative. The prospectuses should be carefully considered before investing or sending money.
