Brian Gruss Licensed Insurance Planner

As Your Income Grows, So Should Your Life Insurance Coverage

Most people fail to realize that when they accomplish goals like earning more money and achieving a higher standard of living, they increase their need for life insurance. That’s because life insurance provides support for your dependents if you die prematurely. It allows your family to maintain the same standard of living they have become accustomed to, even after you die.

Just think of the many ways your family depends upon your income and what would happen if it were suddenly taken from them with no replacement. If you have a stay-at-home spouse, they may need the death benefit proceeds from a policy to pay the mortgage or save for your children’s education. The money your spouse receives from the death benefit can help them continue to care for your family in the interim while looking for a job. Without that financial cushion, your spouse might have to sell the house or your children may have to delay going to college.

To be sure that you adequately provide for your dependents, you should increase your life insurance as your salary increases. The ratio between your coverage amount and your salary decreases, as your salary gets higher. So if you begin with a policy providing a death benefit equal to ten times your salary, by the time you reach 50 years old and are earning twice as much money, the coverage amount will have decreased to only five times your salary.

And don’t think that once you turn 65 and your children are grown, you no longer need life insurance. Remember, most people live up to every penny they earn. As their income increases, they tend to increase their standard of living via expensive new homes or cars, so that at age 65, many of them could still conceivably be carrying mortgages or auto loans. In order for the surviving spouse to maintain their current lifestyle, the insured would have had to increase their coverage to keep pace with their spending.

There is also the issue of longevity. Today people are living into their eighties and beyond. If the insured dies at 65, the surviving spouse could live another twenty to thirty years, in which case they would need the death benefit proceeds to cover living expenses.

It is clear that there is a real need to have your life insurance keep pace with your salary. You should review your life insurance annually with your agent, Brian Gruss, to develop a plan to ensure your dependents will remain financially comfortable after your death.

Tags: Auto Loans, Children Education, Children S Education, Death Benefit, Dependents, Education Money, Financial Cushion, Going To College, Income Increases, Income Insurance, Interim, Life Insurance Coverage, Lifestyle, Mortgage, Mortgages, New Homes, Pace, Proceeds, Salary, Stay At Home

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.

Tags: Adult Children, Business Partners, Children With Special Needs, Ditch, Financial Confidence, Financial Peace, Financial Security, Five Good Reasons, Heirs, Journal Of Financial Planning, Life Insurance Coverage, Life Insurance Plan, Life Insurance Policy, Matter Of Fact, Monetary Assets, Peace Of Mind, Retirement Investments, Retirement Portfolio, Substantial Portion, Tax Business

Empty Nesters Shouldn’t Say Good Bye to Their Life Insurance

The kids are all grown, and finally it’s just the two of you. Your life is changing, and you are making decisions about what pieces of your former lifestyle should remain the same and what should be altered. There are some items you will decide to let go, but make sure your existing life insurance coverage isn’t one of them.

Why do you need insurance at this time in your life you ask?  Here are ten reasons:

·   To accomplish financial goals – If your children are financially dependent on you because they are still in college, life insurance can help fund their education even if you aren’t around. Keep in mind that Social Security benefit payments for a surviving spouse and children cease when students finish high school.

·   To care for dependents – Life insurance will continue to provide for your parents and disabled adult children if you die before they do.

·   To buffer you from the Social Security “blackout period” – Social Security pays no benefits from the time the youngest child leaves high school until the surviving spouse applies for retirement benefits. This period is called the “blackout period,” and it can cause extreme financial hardship to the surviving spouse if there is no income stream. Life insurance provides much needed income.

·   To supplement reduced Social Security survivor’s benefits – If a spouse begins receiving Social Security survivor benefits earlier than the full-benefit age, their monthly benefit will be permanently reduced. In addition, because their spouse died early, salary increases that might have increased Social Security benefits were not applied to their record. A life insurance policy can help make up for these losses.

·   To supplement lost retirement savings – If a spouse died before retirement, they didn’t earn salary increases that might have increased employer pension benefits and/or IRA contributions. A life insurance policy can help make up for these losses too.

·   To meet commitments that were made at a time when there were two incomes – Financial commitments like mortgages or loans are based on the combined income of a two-paycheck couple. If each spouse has life insurance the survivor can continue to meet those commitments.

·   To pay for unexpected expenses – Funeral and burial costs, final medical expenses, estate administration and estate taxes aren’t always anticipated. Life insurance prepares you for these costs no matter when they happen.

·   To create a financial emergency fund – If a family doesn’t have an emergency fund equivalent to at least six months of income, they could be extremely vulnerable if one of the wage earners dies. This lack of funds could also impact the family’s ability to obtain credit. Life insurance can be the family’s emergency fund.

·   To supplement lost income if a spouse dies after beginning Social Security benefits – Each spouse receives a check for his or her Social Security retirement benefits. The earner with the larger pre-retirement income gets a benefit based on that income. The spouse with the smaller, or no pre-retirement income gets a benefit based on their own earnings, or half of their spouse’s Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues, but the smaller one stops. Life insurance can make up for this income loss.

·   To provide for charitable causes – If you want to ensure your favorite charities get money after your death, you can designate some or all of your life insurance benefits to this purpose.

Tags: Adult Children, Benefit Payments, Blackout Period, College Life Insurance, Employer Pension, Empty Nesters, Financial Goals, Financial Hardship, Income Stream, Ira Contributions, Life Insurance Coverage, Life Insurance Policy, Pension Benefits, Retirement Benefits, Retirement Savings, Salary Increases, Social Security Benefit, Social Security Benefits, Stream Life, Survivor Benefits