Life & Health Insurance
What is Life Insurance?
Life insurance helps financially protect your family in the event of your death. There are several different kinds of life insurance policies plus all kinds of additions and exceptions that get tacked on. It can seem a bit complicated, so that’s why we are here to answer any questions you may have before purchasing your policy.
Life insurance basics
Many of us buy life insurance, because we want to make sure our loved ones remain financially secure after we die. For those interested in estate planning, cash accumulation, wealth transfer and estate tax liquidity, life insurance can be a tool to achieve those goals as well.
There are many choices when it comes to life insurance. Policies are now available from a variety of life insurance companies in the United States, as well as from banks and other financial institutions.
Assessing your life insurance needs
Before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors. For example, who will be responsible for your funeral costs and final medical bills? Would your family have to relocate? Will there be adequate funds for future or ongoing expenses such as daycare, mortgage payments, or college?
You should reevaluate your life insurance policies annually or whenever you experience a major life event such as marriage, divorce, the birth or adoption of a child, or purchase of a major item such as a house or business.
Reasons you might buy life insurance will vary, depending on your age, financial situation and other factors. Listed below are some examples:
- Single person with no dependents: Funeral expenses; medical bills; debts, such as credit cards or student loans; elderly parents who may be dependent upon you for support. Note: Buying life insurance at a young age is cheaper. As you get older or possibly incur a serious health condition, it will be more expensive or difficult to buy a policy.
- Single person with dependents: Funeral expenses; medical bills; outstanding debts; caretaker expenses for your surviving dependents; education costs for surviving children.
- Couple with no children: Funeral expenses; medical bills; outstanding debts, especially mortgage or car payments.
- Couple with children: Funeral expenses; medical bills; outstanding debts, especially mortgage payments; child-rearing expenses; education costs. Note: Even if one partner does not work outside the home, you may want to consider life insurance to help pay for childcare or other services performed by that partner.
- Older couple: Funeral expenses; medical bills; impact on spendable income; outstanding debts, such as a new home, second vacation home, or recreational vehicle; impact on assets you may want to leave for children or grandchildren.
What are my options?
The two main forms of life insurance available are “term” and “permanent.”
Simply put, term life insurance provides death benefit protection for a specified period of time (for instance, you might buy a 10-year term policy). Generally speaking, if you’re looking for coverage for a short period of time, term life makes sense.
If you are interested in using the policy as a form of savings, consider a permanent life insurance policy. Regardless of the type of life insurance you buy, most policies require you to meet certain medical criteria.
Non-Guaranteed Term Life: Non-guaranteed term life provides coverage only for a short time (usually a year) and is pure death benefit protection. The risk with term life is that your health might deteriorate and you could be unable to get another policy once the term is up. Premiums can also increase dramatically as you age. Term life insurance is a good choice for young people who can’t afford the higher costs of permanent insurance, or for people with financial obligations that will disappear in time, such as a car loan or a mortgage.
Annual Renewable and Convertible Term: Annual renewable term insurance policies are for multiple years, usually 10, 20 or 30 years. By buying a longer term policy, your costs can be stretched out to avoid the annual increases found in non-guaranteed term life.
Convertible term is similar to annual renewable term, but it offers the opportunity to convert the coverage to a permanent policy in the future — when regular term premiums might become cost-prohibitive because of your age or health. This is a good choice for young people, who are unable to afford the higher cost of permanent insurance right now.
Whole Life or Ordinary Life
Similar to annual renewable term and convertible term, whole life policies stretch out the cost of insurance over a longer period of time. With whole life policies; however, the costs are spread out over your entire life. Once your premiums are paid up, the excess dollars are invested by the company. In essence the insurance company is managing the investment of your excess premiums, and that’s why your choice of company is so important.
With this type of policy; however, the inflexibility of premium payments could become a burden if your expenses increase or if you lose your job.
This option offers greater flexibility than whole or term life. After your initial payment, you have the option of reducing or increasing the amount of your death benefit. If you choose to increase your benefit, you may have to provide medical proof that your health has not deteriorated. Also, after your initial payment, you can pay premiums any time and in any amount, as long as you don’t miss a payment. In some cases, there are limits to how much extra you can pay in advance premiums.
You will need to manage these policies to maintain sufficient funding, especially because the insurance company can increase charges.
As the name suggests, Variable Life policies offer fluctuating benefits. That’s because the insurance company invests your premiums. The insurance company offers you a choice of funds, in which your money will be invested. The amount of money your beneficiaries will receive and the cash value of your policy depend on how well the insurance company invests your money.
There are both Universal and Whole Life versions of Variable Life.
In most variable and some universal life insurance policies, if your investments perform well, you’ll have a higher cash value and death benefit (some universal and variable universal policies also allow you to add your cash value into your death benefit). If the investments lose money, you’ll have a lower cash value and death benefit. Some policies will guarantee a minimum death benefit.
You can also take loans against the cash value of your policy, but if you don’t pay them back with interest, your beneficiaries will receive a reduced death benefit. You can also surrender your policy for cash or convert it into an annuity, but keep in mind that cashing in a permanent policy after only a couple of years is an expensive way to get insurance protection for a short time.
Look closely at the investment options insurance companies offer for Variable Life policies. Make sure they are well-balanced, and give you an opportunity to invest at your own risk tolerance.
It has been said and proven that A healthy body is a happy body. Having the right health plan is one of the best ways to preserve your health and your family’s longevity. Let Guardian Group Solutions find the right health plan for you!
Without affordable health coverage, you could end up leaving you and your family at risk health wise and financially. Call 718.428.3100 and talk with one of our friendly agents today to learn more about the health plans we can offer you.
What are the major types of health insurance policies in New York?
There are basically three major types of health insurance policies for New York residents to choose from:
Consumer-Directed – you setup a health fund that can be used to cover medical expenses.
Fee for Service – you pay a fee to your provider for every healthcare service you receive. The benefit of this type of health insurance plan is that it allows for a lot of flexibility when choosing a physician or healthcare provider
Managed Care – enjoy more benefits like lower out-of-pocket costs. However, you can only receive treatment from physicians that participate in the managed care network. Typical managed care plans include health maintenance organizations (HMOs), preferred provider organizations (PPO), and point-of service (POS) plans.