Brian Gruss Licensed Insurance Planner

Why It’s Never Too Late for Life Insurance

You’re older now, your children are grown and you have a plenty of assets, including a healthy retirement portfolio. So, should you ditch that life insurance plan?

Many people reach a point in their lives when they begin to question the necessity of life insurance. Obviously, your situation has changed quite a bit since you initially purchased the policy. More than likely, you no longer have young children who rely on your income. By now, your children are probably out of the house and earning their own income. If you were to die, your spouse would be covered by income from your retirement investments.

However, there are still plenty of compelling reasons for you to hang on to that life insurance policy. For one, it offers financial peace of mind. As a matter of fact, the more life insurance coverage a person has, the more confident they are about their financial security, according to a 2008 Journal of Financial Planning survey.

Of course, financial confidence isn’t the only benefit to life insurance. Before you run out and cancel that policy, consider the countless advantages life insurance has to offer at any age. Here are five good reasons to hold onto that policy:

Advantage #1: It prevents financial loss for your loved ones.

If any of your loved ones would suffer from a financial loss if you were to die, you definitely need to keep your life insurance policy. Life insurance is critical for the following people:

• Couples in their peak earning years
• Parents of non-adult children or grown children with special needs
• Retirees who will lose a substantial portion of income if one spouse dies
• Families with a large estate that will be subject to estate tax
• Business owners and business partners
• People who want to pass monetary assets on to their heirs tax-free

If you fall into one of these categories, you still have a significant need for life insurance.

Advantage #2: It ensures a comfortable retirement for your spouse.

You may assume your retirement investments would provide plenty of income for your spouse if you were to die. However, it’s important to ask yourself a couple of critical questions: If I were to die tomorrow, would my spouse be able to maintain his or her current quality of life? Would he or she still be able to save up for a comfortable retirement? Probably not.

Suddenly faced with a smaller income, your spouse may end up cutting back on retirement contributions to make ends meet. That could put her retirement years at risk. However, if you were to hold onto that life insurance policy, the proceeds could give your spouse enough income to cover every day expenses, allowing her to continue to build up her nest egg.

Advantage #3: It offers quick cash for your family.

Life insurance death benefits can provide fast cash for your surviving loved ones. As long as your policy is up-to-date and in order, your beneficiary could collect the death benefit as quickly as a couple of weeks after your death. This money could be essential at that time, as your spouse may be facing massive medical bills, outstanding debts, taxes, probate costs and other final expenses.

Advantage #4: It helps to shield your estate.

If you own a successful small business or have a high net worth, your family may be subject to estate taxes after your death. Depending on the value of your estate, these taxes can be steep-and this could create serious financial hardship for your loved ones. Without life insurance, many or all of your assets could be liquidated to pay your estate taxes. You can prevent this from happening with a life insurance policy.

Advantage #5: It allows you to leave behind a legacy.

Life insurance also enables you to leave behind an inheritance to your children or grandchildren. This money could help pay for your son’s graduate school expenses or your granddaughter’s wedding. Even if they don’t need this money, you may want them to have it. It may be worth it to give up some of your income now to make sure your loved ones receive a special gift later.

On the other hand, you could use the proceeds from your policy to make a significant contribution to your favorite charity. If there’s a special charity that’s near and dear to your heart, you could continue to pay just a little into a life insurance each month so you can leave something behind to the cause.

Of course, whether you choose to keep your life insurance policy after retirement is entirely up to you. There is no “right” answer-it all depends on your unique situation. If you’re struggling to make this decision, discuss the pros and cons with Brian Gruss.

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Could You Pay Your Bills If You Were Unable to Work?

A January 2007 survey conducted by International Communications Research on behalf of the National Association of Insurance Commissioners (NAIC) revealed that 56 percent of U.S. adults say they would be unable to pay their bills if they became disabled and could not work for a year or longer.

Despite this sentiment, only 44 percent of respondents indicated they had long-term disability coverage. Of these, 71 percent said their employer provided long-term disability insurance, which would leave them vulnerable to the financial effects of a long-term illness if they become unemployed.

Not only are Americans unprepared to deal with the financial devastation of a long-term disability, they are also unaware of the chances of becoming disabled. Only 13 percent of those polled responded that it was somewhat or very likely they would become disabled and unable to work. However, the Social Security Administration reports that 20 percent of the nation’s population will become disabled for a year or more before reaching age 65.

The NAIC noted that the majority of people fail to consider the impact of a disability on their ability to remain financially independent. They believe that understanding the role of disability insurance is essential to one’s total financial security.

To help consumers who are considering purchasing disability insurance, the NAIC offers the following guidelines:

·                     Determine how much money you’ll need to cover your critical expenses such as mortgage payments/rent, food, utilities and transportation should you become disabled. Unless your investments and savings can maintain your current lifestyle for several years, you should consider purchasing long-term disability insurance.

·                     Understand that having a pre-existing health condition, such as a back problem or heart ailment, could affect your ability to qualify for long-term disability insurance.

·                     Obtain disability insurance at a young age and find a “non-cancelable” policy. With these policies, your coverage can never be cancelled nor can premiums increase once your policy has been issued, so long as you pay your premiums on time.  A “guaranteed renewable” policy cannot be cancelled, but premiums could increase as stated in the policy.

·                     Know how long a waiting period your policy stipulates before benefits are paid. The longer the waiting period you select, the lower the premium.

·                     Keep in mind that many insurance companies will require supporting documentation from physicians to verify whether, and to what extent, you are disabled, before paying a claim.

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Immediate Annuities Can Help You Secure Your Retirement Income

As you approach retirement, it’s natural to worry about your retirement portfolio. It is also natural to become frightened during a recession, such as the ongoing downturn that started in 2008. During tough times, your entire strategy can suddenly become worthless. The supply of cash that you have carefully built up over your working life is gone, vanished like so much dust. This is downright scary. What shall you do? Many individuals in this same situation end up taking part-time jobs in order to support themselves.

An immediate annuity can help you regain liquidity. Buying an annuity is like buying a monthly pension check. It is an insurance policy that pays you a lifelong income stream in exchange for a lump sum. There is no age limit for purchasing an immediate annuity; you can buy one at 80 or 90 if you want to. When the payments start is entirely up to you. Once you decide on a date, the payments are orderly and on time, appearing on that date every month for the rest of your life.

Consider several advantages to immediate annuities:

• Your insurance agent will be able to tell you what the monthly payment amount is based on your lump sum.
• The annuity is backed by the financial security and assets of an insurance company, so do your research before buying.
• This product affords you, the beneficiary immediate peace of mind since the payments start when you choose. You can rest completely assured of a secure, stable long-term monthly income. You can even add an inflation rider to the policy so that your income will not get eaten by inflationary pressures.
• Since immediate annuities are different from stocks and bonds, there is no worry about volatility or market fluctuations. The value of the annuity remains constant. You have the protection of knowing that every month, the money will be deposited into your bank account.
• There are no fees of any kind to be paid – no management fees, no setup or administrative fees, and no annual fees.
• Favorable tax treatment – Only a small portion of income generated from an immediate annuity funded with after-tax dollars would be taxable.  This is because part of every payment is considered a return of principal.

Is an immediate annuity right for you? That depends on your unique needs of course. For those seeking to secure a future income stream, immediate annuities are a perfect way of achieving a guaranteed monthly income which will not fluctuate due to external forces. The peace of mind possible with having an income stream one cannot outlive should not be ignored.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, may be subject to a 10% federal income tax penalty.

Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company.

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