The financial security of your family and the future of your retirement may be impacted by three key financial risks.
Dying Too Soon
Without income how will the bills get paid?
Living Longer Than Expected
Will I have enough assets and income for retirement?
Tax Advantaged Income
How much net income can I expect after taxes?
How can I optimize my portfolio for tax efficiency?
Life insurance provides for a variety of these risk factors. It is not necessarily purchased at one time nor is it a one product fits all solution. Life insurance is purchased because you love someone and or owe someone. It is important to understand the types of life insurance and appropriateness for your needs and age.
INCOME REPLACEMENT
Permanent and/or term life insurance protects your family financially from an unexpected death and resulting loss of income. A combination of permanent and term often makes sense as it limits the expense for an ongoing need. One example is a laddered term portfolio (e.g. 10-year term and 20-year term), and a permanent policy can provide an economic solution.
Term insurance is used to cover a need for a specific time period; while permanent life insurance is intended to stay in place throughout your lifetime.
CASH ACCUMULATION
Permanent life insurance has unique features that allow you to accumulate cash value on a tax-advantaged basis. This cash value can be used in later years to supplement retirement income, provide for college tuition or to help a loved one in difficult financial circumstances. In many states, the cash values are also protected from the claims of creditors. You can protect your loved ones and add cash value life insurance as a diversified, tax-advantaged asset to your financial portfolio.
ANNUITIES
Annuities are insurance products that pay out income and can be used as part of a retirement strategy. Annuities are a popular choice for individuals who want to receive a steady income stream in retirement. Money is deposited into the annuity, it then pays out to you on a future date or a series of dates. Payments can be made for the rest of your life, or for a set number of years. The amount you receive depends on whether you opt for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of the annuity’s underlying funds (variable annuity).
DISABILITY INCOME
Provides income if you become sick or injured and can’t work. It helps maintain your lifestyle without draining savings. Basic coverage is purchased as a monthly benefit that represents a percentage of your earned income. The potential loss of income can be devastating to you and your family. Disability insurance is about more than dollars and cents; it is about your financial security.
LONG-TERM CARE (LTC)
There are standalone LTC insurance policies that provide benefits while in a nursing home or for care at home. However, there are also permanent life insurance policies available with a rider to cover LTC needs. The added feature of a permanent life insurance policy with a LTC rider is that your family will benefit whether or not the LTC rider is ever triggered. If the LTC
benefits are not completely utilized during your lifetime, a death benefit will be paid to your beneficiaries at your death.
ESTATE PLANNING
Permanent life insurance coverage can create liquidity to pay estate taxes and provide additional income to loved ones to help them maintain their lifestyle at your death.
Insurance portfolios should be regularly monitored. Life insurance is a long-term commitment, stretching for 20 years or more. However, your insurance goals, objectives, and needs are likely to change over time. Term policies are designed to end at a certain period of time. Living longer can also be a big risk for individuals with older permanent life insurance
policies. Many of these policies were only designed to last to age 90 or 95. Even with policies designed to go to age 100, there is a risk of living beyond that term if the policies are not performing as anticipated. You want to be certain you will not outlive your life insurance policy no matter which type you purchase.