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Life Insurance Policy Review: Does Your Coverage Still Fit?

When did you last review your life insurance?

A policy you purchased years ago may still fit your needs. However, changes in your family, finances, or goals can affect your coverage needs.

A life insurance policy review helps you understand your protection. It also helps you decide whether adjustments make sense. A review doesn’t automatically mean replacing your policy or buying more insurance.

When should you review your life insurance?

An annual check-in is a useful habit. In addition, revisit your coverage after significant changes, such as:

  • Getting married or divorced.

  • Having or adopting a child.

  • Buying a home or paying off your mortgage.

  • Starting a business or changing jobs.

  • Taking responsibility for an aging parent.

  • Experiencing a change in income.

  • Approaching retirement.

  • Improving your health or stopping tobacco use.

Some changes may increase your coverage needs. Others, however, may reduce them. Either way, the goal is to match your protection to your current responsibilities.

What should a life insurance policy review include?

A useful review goes beyond checking the death benefit. For example, your beneficiaries and coverage deadlines deserve attention, too.

Start with these five areas.

1. Your coverage amount

First, consider who depends on your income or unpaid support. Would your coverage help them manage housing, childcare, debts, and everyday expenses?

Next, consider your savings and other insurance. Also, think about how rising costs may have changed your original estimate.

2. Your beneficiaries

Check your primary and contingent beneficiaries. Their details should be current and reflect your wishes.

For example, marriage, divorce, births, and deaths are reasons to revisit these designations.

If your plans involve minor children or a trust, involve your attorney and insurer. They can help you arrange the beneficiary designations appropriately.

3. Your coverage timeline

If you have term insurance, confirm when the level-premium period ends. Then check what coverage will cost afterward.

Also, ask whether your policy offers conversion options. If so, confirm the deadline and eligible products. These provisions vary by policy.

4. Your premiums and policy performance

First, understand which premiums and benefits are guaranteed. Others may depend on assumptions or future policy performance.

For permanent coverage, review your latest statement and any outstanding loans. Also, check whether current funding is expected to keep the policy active.

An updated in-force illustration can help explain the outlook. It shows how the policy may perform under different assumptions. However, illustrated results are not promises.

5. Your riders and additional benefits

Review the benefits included in your policy, along with any optional riders.

For each benefit, ask:

  • What conditions qualify?

  • Are there additional charges?

  • Would using the benefit reduce the remaining death benefit?

Finally, check whether your existing policy allows changes. New features aren’t automatically available on older contracts.

Could better health affect your options?

Have you stopped using tobacco or experienced a lasting health improvement? If so, ask whether your insurer will review your underwriting classification.

However, better health doesn’t automatically lower your premium. Eligibility and documentation requirements depend on the insurer and policy. Any potential savings will depend on those factors, too.

A review doesn’t have to lead to replacement

Your current policy may have valuable terms worth keeping. In some cases, the best choice is to leave it unchanged.

Alternatively, you might update beneficiaries or add coverage alongside your existing protection.

Before replacing a policy, compare:

  • Guaranteed premiums and benefits.

  • New policy costs and any surrender charges.

  • Underwriting requirements.

  • Any new contestability or exclusion periods.

  • Potential tax consequences, where applicable.

Meanwhile, keep existing coverage in place as you evaluate alternatives. Before canceling an older policy, confirm that replacement coverage is active. Also, make sure you understand its terms.

What should you bring to a policy review?

Gather your policy documents and most recent statements. In addition, bring details of any life insurance through work.

A rough outline of your debts, household expenses, and goals will also help.

However, you don’t need every number ready before starting. The conversation can identify any missing information.

Schedule your life insurance policy review

At Life Insurance Specialists, we help Colorado individuals, families, and business owners understand their coverage.

We can review what you have and explain your options. Then you can decide whether your policy still fits or needs attention.

Contact Simon McGowan, CLU®, to schedule a life insurance policy review.

life insurance and charitable giving picture of wrapped presents

The Giving Season: Charitable Gifts and Life Insurance

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We have officially entered the season of giving!  As winter digs in and we prepare for the myriad holidays before us, Americans reflect on feelings of gratitude and generosity.  We can hear the bells of Salvation Army volunteers standing beside their red, hanging buckets.  We receive mail from our charities asking for support to fund their upcoming year.  In this spirit, the shorter days of winter are long on charitable giving.  People who have the time and means to give back to causes that inspire them may not realize that the gift of life insurance can be a game-changer for charitable contributions.  There are several ways in which you can use life insurance to support your donations.  Some even offer tax-friendly outcomes on estate taxes.  Let’s learn more.

season of giving picture of winter woods landscape

3 ways you can use life insurance policies to support charitable organizations

You may want to consider purchasing a life insurance policy or altering an existing policy to include your preferred charity or non-profit organization.  Here are three ways to do just that.

Name a charity as one of your beneficiaries

The simplest way to include a charitable organization in your life insurance policy is to add them to your list of beneficiaries.  This means that alongside your heirs and any other people you have named to receive the death benefit portion of your policy, a charity can also receive cash from this benefit.  Additionally, your taxable estate can be reduced by the amount of death benefit you donate to the charitable organization.

Beneficiaries on life insurance policies are private.  The outside world and even the other beneficiaries will not know whom you’ve named to receive the benefit in the event of your death.  This means that the donation will not be able to be contested and you can be certain that the charity you named will receive your support posthumously. 

Use a charitable giving rider

Another way to show love to your preferred charity is to add a Charitable Giving Rider to your policy.  On high-value policies, this rider can usually be added at no additional cost to you. The rider itself imparts a portion of the policy’s face value to the charity.  In some cases, it imparts an additional benefit amount. 

There are some limitations to this approach.  The charity itself must meet the criteria specified by the insurance company.  Additionally, this method may require a larger amount of protection in order to qualify.  Overall, however, the charitable giving rider can provide a substantial financial gift without the need to set up a separate gift trust and at little to no cost.  

Gifting an entire life insurance policy

If you are someone who is heavily invested in a particular charitable organization and intends to leave behind a large estate to your heirs, you should consider donating an entire life insurance policy to your preferred cause.  This approach is more involved than simply naming the charity as a beneficiary or attaching a charitable giving rider to a policy, however, the tax advantages for your estate are greater and the financial windfall for the charity is more significant.

When you gift a life insurance policy, the charity becomes both the owner and sole beneficiary of the policy.  With a permanent policy, the charity can either choose to continue the policy or surrender it for the cash value.  If they continue the policy, you can pay the premium payments directly to the charity and write them off of your taxes.  

Gifting a policy can help take an older, less helpful policy that you may have purchased at a different time in your life and turn it into a meaningful contribution to a charity while also reducing the taxable burden to your estate. 

using life insurance for charity picture of winter and snow

Let us know how we can help you give the gift of life insurance this season

Gifting life insurance can have implications for your overall estate plan.  You should consult with your estate planner and an insurance specialist to decide the best path for your contributions. We are happy to help you get the ball rolling and answer any questions you may have regarding your policies and how they might make a difference to your preferred charity or cause.  Let us know how we can help you this season and from all of us, we wish you and your loved ones a happy, festive, and giving holiday!

Life Insurance for the unexpected (picture of the sun setting over the ocean with water in the foreground)

Remembering Sebastian: Life Lessons Close to Home

September is Life Insurance Awareness Month. I made light in a previous post about how there is an awareness month for just about everything and, until recently, I truly believed that life insurance awareness month was just another marketing opportunity to sell more policies. However, today I’m going to share a very personal story and why I will now use it as a way to amplify the message that you must have at least some type of life insurance in place. It has been said before, and here I will reiterate, that you don’t buy life insurance for yourself… you buy it for the ones you love. Additionally, I think that we all get hung up on the idea that we need to have a full estate plan in place before we look at these sorts of things. I’m going to discuss a few things that can be done right away that don’t need the expense of hiring an estate attorney to draw up documents.

We can’t predict the future, we can only prepare for it

On July 30th this year, my 38-year-old brother died suddenly due to an undiagnosed medical condition. We are all extremely heartbroken and his wife and son are now left with sorting out how to move on without him. Unfortunately, he was the sole breadwinner in the household and, although we had multiple conversations about his need for life insurance, we were never able to complete the process before he passed.

Although this tragedy would, most likely, have not been avoidable, having the protection that life insurance offers in place would have drastically changed the story now. There is a period of grieving that everyone must go through after an unexpected tragedy of this magnitude and the last thing my sister-in-law should be concerned about is how to make the next mortgage payment. In this business, we always say that we never want to see a GoFundMe account set up for someone. Life insurance is less expensive than most people think and is easier than ever to put in place. There should be no excuse not to have one. With that said, I was forced to do the one thing I said I never would do, and that was set up a GoFundMe account.

Plan for any eventuality

The icing on the cake here is my brother had titled all the assets in his name only and did not have a will. I don’t think many people realize the importance of having their homes and cars titled correctly. The implications here are massive. All the assets that were held in my brother’s name only, now revert to his estate and will be tied up in the probate process which could take a year or more. If the house and car were titled in both their names, it would have avoided probate, and my sister-in-law would have had the ability to do whatever she needed with them.

I share all of this to emphasize the importance of doing some initial estate planning. The fact is that the majority of people don’t need to pay huge sums to an estate attorney to draw up detailed estate plans. Your bank accounts, retirement plans, insurance policies, investment accounts, and health savings accounts all need to have named beneficiaries on them. And when your insurance agent asks you to do a beneficiary review, please take them up on it. Our lives change and our needs change, and it is very much in your interest to make sure you check these on an annual basis.

Protect your family

Make sure you establish your directives and ensure your family’s needs will be met. This is where a will would be helpful. Again, you don’t need to spend a fortune here. If you have a larger and more complex estate, then you absolutely should hire an estate attorney to help. There are good services out there that can help you put a simple will in place with the main aspects being naming an executor, and maybe most important, a guardian for your children and detailing your wishes for their care. And, once again, make sure you have enough life insurance! Here is a life insurance needs calculator to help you. Some insurance companies even offer these online services as part of the life insurance policy.

Finally, don’t forget the importance of having your medical directives known. An advanced medical directive will give you the peace of mind that if something were to happen to you and you were unable to make decisions for yourself, your wishes will still be conveyed. The whole process of putting these planning vehicles in place will take minimal time, but are worth the sacrifice of your weekend afternoon, I promise.

Whatever you do, do something.

We are very private people, and this is very difficult to share. I believe if we can help just a few people avoid the pain that my brother’s family is going through right now, then sharing this story was worth it. Remember, there has never been a widow that wishes there was less life insurance. I don’t care if you buy from us or you go to your State Farm agent, get life insurance, and get a lot of it. We’re here to help. Whether you need life insurance or just want someone to review what you have, please call us. If we can’t help, perhaps we can steer you to someone who can.

Layering term life insurance picture of 4 ladders

Did you know that you could layer term life insurance?

Term life insurance offers some of the most affordable policies in the marketplace.  Depending on your age, health, and gender, you can see monthly premium rates in the $10 and $18 dollars range in policies with a 10-year term and $300,000 death benefit.  But what if you wanted to purchase term life insurance in order for your family to pay off your new, 30-year mortgage should you pass away?  Well, you could purchase a 30-year, $300,000 policy for around $30 dollars per month but you would save considerable money if you ‘layered’ 3 separate term life policies.  Let’s explain why you would want to layer term life insurance policies.

definition of term life insurance 

A quick explanation of term life insurance

Key definitions:

  • Coverage
    • Also referred to as the ‘death benefit’, this is the amount of money that will be payable to the beneficiaries upon the death of the policyholder.
  • Term
    • A term life policy is set for a specific number of years.  For example, in a 10-year term policy, the policyholder will be covered for 10 years.  If they do not pass away during that time, the policy is finished at the end of 10 years. 
  • Policyholder
    • The person covered under the policy.

Term life insurance provides the policyholder a set amount of coverage (in the case above, that would be $300,000) that will pay out, tax-free, to their beneficiaries should they pass away during the course of the term (policies are flexible and can be found in 5, 10, 15, 20, and 30-year terms).  Term life insurance policies have no cash value by themselves and should the policyholder outlive their term, the policy will end.

using term life to protect mortgage. Picture of a house

How term life insurance can be used to protect your mortgage

Your home is one of the largest, most important purchases you will make in your lifetime.  Your family depends on a roof over their head.  If something were to happen to you, your family would lose the income that you provided to pay for the mortgage.  It’s a disaster on top of a disaster for a family to lose a loved one and find themselves unable to pay for their home. 

Term life insurance is a perfect fit to solve this potential crisis.  Due to the fact that most mortgages are in the 30-year, 15-year, and 5-year time frame it is easy to match a term policy to cover your mortgage and help your family pay off the house should you die unexpectedly.  

For example:

Let’s say you purchase a $300,000 dollar house on a 30-year mortgage.  In order to ensure that your family can stay in the house after you’re gone, you could purchase a 30-year term policy with a $300,000 death benefit.  This way, if something happens to you before you are done paying the mortgage, your family will have $300,000 dollars to pay off the house.    

How much would a 30-year, $300,000 dollar term life policy cost?

Depending on your health, age, gender, and other factors, a 30-year-old man in perfect health would pay around $20 dollars per month for a 30-year, $300,000 term policy.  Someone in average health could look to pay between $25 and $32 dollars per month in premiums.   

How layering multiple term policies saves you money

There are 2 inefficiencies in the example of buying a 30-year, $300,000 dollar policy to cover your mortgage:

  1. It does not take into account that if you were to pass away in the 20th year of your mortgage, a large portion of your home would already be paid off.  This means that you are paying for more coverage than you need.
  2. It does not consider that a 30-year term life policy is considerably more expensive than a 10-year term life policy. 

The answer:  Layer multiple term policies

Seeing as you will owe less and less on your house as time passes, you only need to cover the entire $300,000 dollars in the beginning of your mortgage.  We propose a more economical approach.  Instead of purchasing one 30-year policy for $300,000, you could purchase one 10-year policy for $100,000, one 20-year policy for $100,000, and one 30-year policy for $100,000.  Let’s break that down.

  • Years 1-10
    • Your 3 term life policies have you covered for $300,000 dollars. 
    • If you pass away in years 1-10, the house will be completely paid off  
  • Years 11-20
    • You stop paying premiums on your now expired 10-year, $100,000 dollar policy. 
    • Your remaining 2 policies have you covered for these 10 years for $200,000 dollars
  • Years 21-30
    • You stop paying premium on your now expired 20-year, $100,000 policy.
    • Your remaining 1 policy has you covered for these 10-years for $100,000 dollars.

How much money will that save me?

Let’s assume that you are a 35-year-old male in decent health.  Your yearly total premium cost for a 30-year, $300,000 dollar policy is $336.00 dollars/year (this assumes a $28 dollar monthly premium bill).  

Total cost for 30-year, $300,000 policy if you outlive the term:  $10,080 dollars

Now let’s look at the price for 3 layered term policies.

  • 10-year, $100,000 policy
    • Total cost of monthly premiums for 10 years: $1,440.00
  • 20-year, $100,000 policy
    • Total cost of monthly premiums for 20 years: $2,016.00
  • 30-year, $100,000 policy
    • Total cost of monthly premiums for 30 years: $2,736.00

Total cost for 3, layered term life policies if you outlive the 30 years: $6,192

In this scenario, if you outlive your mortgage and your 30-year term, you will have saved $3,888 dollars!  That is money that you could have invested in a mutual fund, spent an extravagant family vacation, or made needed repairs and upgrades to your home.  This is the power of term layering!

piggy bank representing money saved by layering term life insurance

My Life Insurance Specialist wants to help you save money without sacrificing protection

We hope you see now how term layering can be extremely beneficial to your family’s finances.  If you would like to ensure that your family will be able to pay off your home in the event something should happen to you, feel free to contact us and we can talk about how you can save with term layering.  

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tax-free-growth

Indexed Universal Life vs 401(k): What Will My Tax Bill Look Like?

Most working Americans utilize their companies’ retirement plans. These are usually 401(k) s, or sometimes, 403(b) s. It is always a good idea to save in these vehicles because, the majority of the time, your employer is going to match at least a portion of what you put in. That’s an automatic raise of whatever they’re willing to match, usually anywhere between 3% and 7%. There are also tax-favored vehicles that allow an individual to contribute additional money towards their retirement. These are called IRAs, and act the same as the 401(k), just without the employer match.  

Diving in a little deeper, there are two types of IRA and 401 (k).

  1.       Traditional IRA/401(k)
  2.       Roth IRA/401(k)

The main difference between these two types is when you get to pay your taxes on them. A traditional IRA/401(k) is using what financial advisors call qualified dollars. Qualified money is simply pre-tax money. If you made $100,000, and you contributed $10,000 into a qualified account, your taxable income for that year would then be $90,000. That qualified money then grows, tax-free, in your retirement account until you retire and start taking distributions. Once you start taking distributions (taking the money out after you retire), you then start paying the tax on what you’ve withdrawn at whatever the income tax rate is at that time. (More on this in a bit.)

401K and taxes

A Roth IRA/401(k) uses after-tax dollars for contributions

If you made $100,000 and contributed $10,000 to a Roth vehicle, you would still pay tax on the $100,000 that year. As before with the “qualified” account, it will then grow tax-free. However, the big difference here, is that you don’t have to pay tax on your withdrawals because you already paid it way back when you initially invested it.

Spend less or earn more

So the question becomes: Why choose one over the other? Think about what tax bracket you’re in right now. Politics aside, we, as a society, are racking up a fair amount of debt that can only be dealt with in one of two ways – spend less or earn more. We haven’t proven that we are able to spend less very well, so it’s my guess (as is most experienced consultants) that we will need to earn more and the government earns more by increasing taxes. So by investing in a traditional IRA, you’re getting the benefit of lowering your taxable income this year, but you’re kicking the can down the road. Eventually, you will have to pay tax on that income when you pull it out in retirement and, with the current state of things, your tax bracket will almost certainly have to increase to pay for everything we’ve spent. Thus, you may want to take the tax hit now, while you’re tax bracket is still likely lower, and put that money into a Roth.

penalties of an IRA (picture of a calclulator

IRAs: contributions and penalties

There are a few other things to consider here such as penalties at every turn. You’re only allowed to contribute a certain amount to an IRA each year and as your income increases, the less you’re allowed to contribute until eventually, you’re no longer able to at all. In 2021, if you are married and filing your taxes jointly, you would be allowed to contribute $6,000 dollars as long as you and your spouse made less than $198,000 (Modified Adjusted Gross Income, MAGI). If you both made between $198,000 and $208,000, then you would be allowed to contribute less and if you made more than $208,000, you wouldn’t be allowed to contribute at all. There is a penalty if you put too much in (a 6% excise tax) and they’ll make you withdraw it.

There is also a penalty if you withdraw, or take early distributions as it’s called, from your IRA too early. These are meant to be retirement savings accounts and the government doesn’t want you to raid it until you’re 59 ½. If you do so before then, you will be penalized 10% that year and have to pay income tax on the distribution. If you’re older than 59 ½, then you’re allowed to start taking distributions without penalty, but if it’s a traditional IRA or 401 (k), then expect to start paying income tax on that amount the year you withdraw.

Finally, at age 72, you are required to start taking money out of your IRA. Remember, the government wants you to pay the tax on that money sitting in your retirement account, so they don’t want you to sit on it forever. These are called Required Minimum Distributions (RMD’s). If you fail to take the RMD or don’t take enough, there’s a penalty for that too! You will be required to pay the IRS a 50% excess accumulation penalty on the shortfall of what you were required to pull out!

So… with all that said, there is another way. 

Life Insurance Policy

Cash-value life insurance can be a great alternative to a Roth IRA

Specifically, Index Universal Life, which offers participation in the markets without actually being invested in the market and the best part is, if the markets drop, there is a guaranteed floor allowing you not to lose anything that year.  As the market climbs, your money grows.  Essentially, you can enjoy upside market potential with downside protection!  But, then, that’s not even the best part.  Let’s talk about taxes.

Life insurance is afforded special tax treatment by the IRS. There are no income requirements nor are there any limitations on how much can be paid in but it still grows tax-free inside the cash value indexed account. There are also no tax penalties for withdrawing the money early, nor are they subject to the required minimum distributions. Similar to a Roth IRA or 401 (k), the amount you put in is done with after-tax dollars, grows tax-free, and in the end, can be distributed tax-free! These distributions are done in the form of loans. The insurance company will charge you a small percentage to “borrow” your cash accumulation in the policy and then turn around and continue to credit you the same amount on the money borrowed making it a net-zero loan.

The biggest argument we hear, especially from financial planners and wealth managers, is that insurance costs too much. You can get a better return from having your money actively managed. You have to keep in mind that these professionals make their money from having your assets under their management. 

The fact is that the cost of insurance will almost certainly be less than the cost of taxation. 

The life insurance carriers have designed a better product, and while there is a cost associated with the insurance, the tax savings, later on, will drastically outweigh those costs. There is a final added benefit here too. Index universal life is still a life insurance product. That means there is an income-tax-free death benefit that goes to your loved ones after you pass! Show me a mutual fund, REIT, or cryptocurrency that does the same. Diversification is key. No one is suggesting you put everything you have into a life insurance contract, but no one can argue about the tax benefits either.  

Life insurance is a solid part of any sound financial plan.  Its inherent tax-friendly components combined with market growth and a tax-free death benefit make offer advantages that investment vehicles simply can’t touch.  Contact us for assistance in helping you round out your investment portfolio with an indexed universal life policy.




Final Expense Insurance Picture of a quiet park

Final Expense Insurance: Dying With Dignity

 As with everything, the cost of one’s final expenses is increasing. Rather than be a burden to your loved ones, a permanent insurance policy, such as a final expense whole life policy is available to cover all costs associated with funeral and other expenses after we pass. No one wants to leave behind expenses to our family, and some simple planning can relieve those burdens. Final expense insurance coverage is nothing more than a whole life (permanent life insurance) policy that is there when your loved ones need it most.

How Does Final Expense Insurance Work?

First off, final expense whole life insurance is a form of non-participating whole life. Non-participating whole life is issued by both mutual companies and stock companies. Examples of stock companies would be Transamerica, Protective Life, etc. These non-participating policies do not pay dividends. They do accumulate some cash value, but it’s all guaranteed and is minimal. They are also less expensive because they don’t pay dividends. There are three guarantees with non-participating whole life policies.

  1.     Guaranteed death benefit protection
  2.     Guaranteed fixed premiums
  3.     Guaranteed cash value accumulation

There are really no moving parts to non-participating whole life. Simply pay the fixed premium every month, and there is a guaranteed death benefit when your loved ones need it.

Final Expense Insurance is affordable picture of a piggy bank

How is Final Expense Whole Life Different?

What sets a final expense policy apart from other whole life policies is that it was designed for the specific purpose of covering final bills and funerals.  This is why the dollar amount coverage for final expense insurance is lower than other policies and also why the age and health requirements are more flexible.  

Final expense policies are written for amounts anywhere between $1,000 and $50,000 and usually have fewer available rate health classifications (Preferred, Standard, etc.). These types of policies require less scrutiny by the medical underwriter and allow for a less stringent underwriting process. Older and less healthy consumers can apply and often gain coverage, with minimal underwriting. There are no hospital exams or parameds (mobile nurses that come to your home or office) as there are with more traditional life insurance and there are no labs (blood and urine) collected by the examiner.

Final expense policies are a vital tool in planning for the end of life. With funeral costs increasing, life insurance can be purchased to take the financial burden off of the family. 

It is often believed that Social Security will pay for those funeral costs, however, for those who qualify, the government will only pay a $255 lump sum. That won’t pay for any of it! According to one insurance company’s research, funeral costs can range from $10k to $25k depending on where you live and what services you would like included, and that’s just the funeral expenses!

How Affordable is Final Expense Whole Life Insurance?

As with all life insurance, premiums vary by age, sex, and health. But the following are a few examples.

Age506070
Male$81.23$122.36$249.34
Female$63.77$93.14$168.78

A fairly healthy 60-year-old male can make sure he doesn’t become a burden to his family for only $122.36 per month. Everyone’s situation is a little different, so make sure you’re speaking with a qualified professional who knows the different products and if they are the right fit for you 

Final Expense Insurance for older people picture of middle aged man

You May Be More Eligible Than You Think

Even if you think your age or health may be in question, these final expense products are designed to help many people, even those with health issues, gain the coverage they need quickly and easily and can be customized with various add-on benefits to your unique situation. If you are interested in learning more about final expense insurance, feel free to contact one of our team members to talk over your options.




Term Life Insurance is like renting a home

Deciding Between Permanent or Term Life Insurance

The difference between term life insurance and permanent life insurance is similar to the difference between renting or owning a home.  With term life insurance you are purchasing relatively affordable coverage protection for a predetermined number of years and there is no inherent cash value to you if you survive past your coverage.  Permanent life insurance, on the other hand, costs more, can build cash value over time, and is literally ‘with you’ for your entire lifetime.  Let’s break these differences down a bit further.

Term Life Policies are Affordable and Reliably Simple

Term life insurance is inexpensive insurance that provides a benefit payout to your heirs if you were to die during that specified term. Most companies now offer 10, 15, 20, 25, and 30-year term duration options. The more time you purchase, the higher the premium cost. These term durations come with a fixed premium to you for the duration of the term and depending on your age, health, and type of policy, your monthly premiums could be lower than your cell phone bill.

Permanent Life Insurance for Your Lifetime- picture of eldery couple walking

Coverage For Life: Permanent Life Policies

Permanent life insurance comes in many different forms, but mostly derivatives of two types of insurance: whole life and universal life. These get further subdivided and we’ll go into a few of them in a moment, but, going back to our comparison of permanent insurance to homeownership, permanent insurance comes at a greater cost because it stays with you for your entire life as long as the required premiums are paid in full and on time.

As we dive further into the different types of insurance, it’s helpful to keep in mind why insurance companies price things the way they do.  It all boils down to the risk to the insurance company. The reality is that term insurance is cheap because 99% of term policies don’t pay out as people outlive their coverage, thus the risk to the insurance company is very low. That’s not to say that you shouldn’t get one though. Having an inexpensive term policy in place is still providing the protection that most families need during a period of their lives when the loss of an income is most destructive. 

When speaking of permanent insurance, the one thing we know for sure.  Nobody lives forever.  That means that 100% of these policies will pay out as long as they’re still active increasing the risk to the insurance company that they will have to pay eventually.

Term Life vs Perm Life for your family - picture of family under umbrella

Term is Term, Permanent is…Well a Lot of Things

Term insurance is term insurance. It’s straightforward. There’s not much to discuss here. Permanent life insurance has a more robust offering. 

Whole life is a permanent insurance policy where most aspects, if not all, are guaranteed in the contract. There’s a guaranteed premium, a guaranteed cash value, and a guaranteed death benefit. Whole life comes in two different forms:

Participating whole life

  • Offered by mutual companies i.e. New York Life, Mass Mutual Northwestern Mutual, etc. These companies share their profits by paying dividends, above what is guaranteed, which increases the cash value available to you when the company does well.

Non-participating whole life      

  • Offered by stock companies i.e. Transamerica, Protective Life etc. These tend to be less expensive, but do not pay dividends.

Universal Life is the other type of permanent insurance. It also comes in various forms. These policies have many moving parts and, in some instances, have the ability to accumulate great cash value sums if designed correctly. The riskier the policy is to you, the client, the greater the cash value accumulation potential but this also increases the chance of either losses or perhaps having your policy lapse. Here are some different types of universal life insurance ranked from least to greatest risk:

  1.     Guaranteed Universal Life (GUL) – Often referred to as permanent term insurance. It’s best to think of these as not having any cash accumulation. Pay your premium on time and in full, and the death benefit is guaranteed to whatever the contract states (usually age 100 or 120). This is the least risky and is frequently used in estate planning cases.
  2.     Index Universal Life (IUL) – If you’ve ever heard the term “zero is your hero” this is what is being spoken of. These policies utilize different market indices (S&P 500 index for example) as a crediting method for your cash value. If the index goes up 10%…they credit your policy 10%. Every IUL comes with a cap and a floor. The floor is typically 0, so even if the index loses one year, you don’t lose. The caps vary by company and product but for our purposes, we’ll call it 10%, so if the market increases 12% that year, the crediting is capped at 10%. These are very efficient vehicles for supplemental retirement income planning. It is important to note that your money is not being invested in the market, it is only linked to how the market performs.
  3.     Variable Universal Life (VUL) – VUL is a life insurance product offered through registered, licensed financial advisors where, instead of linking the crediting to an index, they are directly invested in mutual funds. These policies have the ability to grow as much as the mutual fund you and your financial advisor choose to invest in them grows, but there is no floor, and without constant attention, may lose money.

Mother and her children - Choosing life insurance for you

Your Need for the Insurance Should Dictate Your Policy Decision

Everyone’s different. I mentioned above that many agents compare term and permanent insurance to renting and owning a home. This is done not just to help people understand the difference, but also as a sales tactic to sell more permanent insurance. The Dave Ramsey’s and Suze Orman’s of the world would tell you to only buy term insurance and invest the difference, but that blanket statement doesn’t work either. The real answer is, you need whatever you need. If you know you only need 30 years of term coverage to cover a 30-year mortgage on a house, then term life is probably the right choice. If you’re looking for a tax-advantaged, supplemental retirement savings vehicle that is treated similarly to a Roth IRA, a permanent policy is what we need to look at. We’re here to help you navigate these options and our goal is to not bust anyone’s budget. It’s better to have some insurance in place that you can afford than to have nothing at all. 





Life Insurance and Cannabis (picture of cannabis plant and oil)

Wacky Tobaccy: Life Insurance in the Age of Cannabis

Historically it’s been difficult to find coverage for anyone who admits to drug use including marijuana.  The advent of 34 states legalizing marijuana has begun to have an impact on insurers as well.  Insurance carriers have become more relaxed about the users of marijuana.  While each insurer has taken a different approach to the subject, many are now offering reasonably priced policies for cannabis users.

Life Insurance Changes concerning Cannabis (picture of Lady Justice holding scales)

A Seismic Shift in Cannabis Regulations

Until recently, marijuana use has been viewed by life insurance companies the same way illegal drugs have been viewed. If someone were to admit using it, or if it was found that they did so, there would be no chance of obtaining life insurance.  However, as states and municipalities softened their stance on medicinal and recreational marijuana use, the life insurance industry has been working to catch up.  

The data tells us that 11% of US adults say that they have used marijuana in the past month.  Nearly half of all Americans have used marijuana at least once in their lives.  These aren’t just millennials either. These adults are fathers, mothers, grandparents and business owners and have no less need for the protection that life insurance provides than the non-user.  

Will Cannabis Use Affect My Premium Costs for Life Insurance?

The answer is yes and not necessarily.  Health Classifications one of the main metrics used by insurers to determine your health risk and, in turn, calculate your monthly premiums.  The healthier you are, the lower your premiums will be.  For instance, a perfectly healthy person with no negative family medical history can pay as much as 4 times less for their life insurance policy than someone in a high-risk classification.  

Typically the health classifications are:

  • Preferred Plus 
    • A person in excellent health with little or no negative family medical history 
  • Preferred
    • A person in great health that may have non-threatening medical issues and little to no negative family medical history
  • Standard Plus
    • Healthier than the average person.  May have minor health issues or some family history of disease.
  • Standard
    • A person of average health.  They may take one or more medications.  Family medical history may contain more serious diseases such as heart disease.
  • Substandard
    • A person in poor health.  May have more serious chronic health issues and a negative family medical history.

People who smoke cigarettes may have special health classifications based on the fact that they smoke and their other health factors.  One issue that insurers today are grappling with is whether to consider cannabis users in the same way that they consider smokers.  So let’s talk about that.

Will Life Insurance Companies Consider Me a Smoker If I Use Marijuana?

If you are applying for life insurance, you may be asked about your marijuana use.  Specifically, if you smoke marijuana, you will be asked how often you partake each month.  Many people are hesitant to provide this information because they don’t want to be viewed as a ‘smoker’ and the significantly higher premiums that come along with that.  It is important to note that you should never lie on an application.  Lying on an application could void your policy once discovered and your family could lose out on the benefits.  

The good news is that many companies view someone who only smokes marijuana a few times per month as non-smokers.  You could even qualify for preferred status if you are otherwise in great health.  This is wonderful news for most people and it allows you to enjoy lower premiums on excellent policies.

How Much Higher Will My Premiums Be If I Use Marijuana?

A Forbes analysis of the 5 highest and lowest cost policies showed a roughly 23% increase in monthly premium costs if a person uses marijuana 2 or fewer times per month.  For the heavier users, the average premium increase was 47%.  This may sound steep but considering people who used marijuana weren’t even allowed to obtain life insurance just a few years ago, it could be worse.  

Let Us Help You Find the Best Policy

Depending on your age, usage, and whether or not THC is found in the lab results, we may be able to help you get a preferred best, non-tobacco offer today.  At Life Insurance Specialists, we are committed to helping every eligible person obtain fantastic, affordable coverage.  Give us a call to see how we can best serve you!

Long Term Care Insurance for your future (picture of a long road in a field stretching to the horizon)

Who should get Long Term Care Insurance?

In the insurance industry, statistics are the essential tools that build every policy.  Statistics tell a story and help us predict, to some degree, what the future may hold. When it comes to the possibility of needing long-term care at some point in your life, these statistics become tools for you to use as you craft a plan for your potential needs.  Long-term care insurance has evolved to help you meet the financial burdens associated with lengthy stays in assisted living facilities, at-home caregivers, and other age-related costs.  But not everyone will require long-term care in their life which begs the question: Who should get long-term care insurance?  Well, let’s look at the stats. 

As of September 2019:

  • The average annual cost of a semi-private room in a nursing home (not a private one) was almost $90,000! 
  • The average length of stay in a nursing home is 272 nights (that’s the average!). * (Rand Corporation, 2017) 
  • Women are far more likely to need long-term care simply because they outlive their male counterparts.

This last statistic begins to answer the question of who should get long-term care insurance. I was once told by an insurance professional that specialized in long-term care insurance that “if you live long enough, everyone will need some form of long-term care, and we men have the common decency to just die.” Statistically, women outlive men and therefore have a much greater chance of needing care.

So, who should get long-term care insurance? The answer: probably not everyone. 

However, everyone should have a plan. Anyone who has known a family member or a friend who has lived in a long-term care facility can attest to the financial burdens that can drain a family’s bank account. A one-year stay in a “semi-private” nursing home can absolutely decimate someone’s retirement savings.

Who should get long term care insurance (picture of two children walking with their grandmother) 

Won’t Medicare and Medicaid Pay for Long-term Care?

Medicare does not pay for long-term care, despite popular belief. Medicaid, on the other hand, will. Medicaid is a government program that assists those with limited means and income. In order to gain access to Medicaid, you would need to spend almost everything you have first before you would qualify, thus making you essentially destitute. Once you do qualify for Medicaid, you could get nursing care at a Medicaid accepting facility. Although there are very good, clean facilities that accept Medicaid, I can assure you that given the choice, you would not choose to go there.

What about your adult children? Won’t they be able to help? You won’t need that much help anyway, right? In 2019, nearly 66 million Americans or 23% of the U.S. adult population were acting as at-home caregivers for a family member that required long-term care.  This is a very difficult situation for any family.  The financial burden falls onto the family member who must cut hours at work or quit their jobs to become a caregiver for a loved one. 

The question here really is: Do you want to be a burden to your kids and grandkids? I’m guessing not.

planning for the future and long term care (picture of binoculars)

Hope for the Best, But Have a Plan for the Worst

Back to the plan. Everyone and I mean EVERYONE, needs a plan. Traditional long-term care insurance, also referred to as standalone long-term care insurance, has steep monthly premiums and may be too expensive for most people’s budgets.  Additionally, insurance companies are having to increase the premiums on people’s policies on a fairly regular basis. Most companies have gotten out of the traditional long-term care insurance business altogether.  

There are other options that can help offset the costs of long-term care that may be more attainable.  These options consist of increasingly popular hybrid products and what are called asset-based long-term care policies.

Traditional Long-term Care Insurance is a ‘Use it or Lose it’ Proposition

Traditional long-term care insurance policies are becoming very difficult to find. Only a few insurance companies are left that offer them. This type of insurance is generally thought of as the most comprehensive. You will know exactly how much you will get when the time comes for needing it. 

The biggest objection here though is, and rightfully so, if you don’t use it, you lose it. This means you pay your premiums every month with the hope that you never need it. And, if your hope comes true, then you lose all the premiums you’ve paid in.

How Annuities and Life Insurance with Long-term Care Riders Offer Protection without Sacrifice

Hybrid insurance products are plentiful, but the general idea is that you can combine a life insurance policy or an annuity with either a chronic illness rider or a long-term care rider. In the event that you are unable to perform 2 of 6 activities of daily living (think of these as the 6 things you do when you get up in the morning):

  • Bathing
  • Dressing
  • Eating
  • Transferring
  • Toileting
  • Continence

then you can access your life insurance or annuity to pay the cost of the long-term care when you need it most. This also takes care of the “use it or lose it” problem people have with traditional long-term care. At the risk of sounding morbid, everyone dies eventually, so one way or another, you or your loved ones will get the benefit of the insurance.

True long-term care riders come at an additional cost to the policy but are often far more affordable than a standalone long-term care policy. There are also chronic illness riders, which come at no additional charge and can be added to many policies to cover the same issues. Chronic illness riders, however, do not pay out with the same defined benefit as the long-term care riders do. You may only get a fraction of the amount depending on factors associated with how sick you are. With that said, these chronic illness riders are a terrific way to gain some coverage if on a budget.

Asset Based Long Term Care Policies (picture of coins in a jar and stacked)

Asset-based, Long-term Care Policies

Finally, there is another type of hybrid product called an Asset Based Long Term Care policy. These policies are a great fit for those people who have a sum of money that they are not going to need. The idea here is to take that money and use it to purchase, either in a lump sum or over a period of a few years, a life insurance or annuity product designed to pay for any long-term care that may occur in the future. 

Depending on a few factors such as age and health, that $150,000 certificate of deposit sitting at the bank can be leveraged up to $232,000 in long-term care coverage! Over a 3 year period, that is $85,000 per year in coverage that would make a serious dent in the above-mentioned statistic of $90,000 per year for a semi-private room! And, if you don’t use it for long-term care, you don’t lose it! The $232,000 would be paid to your kids as a life insurance benefit that is income tax-free! 

There is a Long-term Care Solution for Everyone

We realize that not all people have a large sum of money sitting in a cd at a bank not earning any interest. Asset Based Long Term Care insurance isn’t meant for everyone. The point is, there are products out there that can fit each individual’s situation, and we’re here to help make sure you don’t become a burden to your loved ones. Our chief aim is to provide options for you to safeguard your hard-earned retirement savings. Also… people needing long-term care services are not just the elderly. We are all one bad car accident away from not being able to feed or use the restrooms ourselves. Everyone needs a plan.  Feel free to ask us how we can help you secure your family’s financial future and create a plan to weather any eventuality. 

Disability Awareness

IULs, Disability Insurance, and the Art of Awareness

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May is National Disability Insurance Awareness Month, DIAM. It, coincidentally, is also ALS Awareness Month, Correct Your Posture Month, National Stroke Awareness Month, National Motorcycle Awareness Month, National Brain Cancer and Brain Tumor Awareness Month, National Moving Month and Older Americans Month.

Shall We Add One More?

If you ask me, we get a little carried away with all the National Awarenesses, but having no control over it, I suppose we ought to embrace it. The mentioning of all the latter awareness’s above is that they all may cause one to become disabled. So, while risking continued awareness fatigue, perhaps it is prudent to celebrate May as National Recommitment Month, and take another look at Disability Insurance.

Disability Breaks the Income Cycle

If you had a machine that printed money, wouldn’t you want to insure it? The idea being that our incomes are our biggest assets needing protection and if we were suddenly to become disabled, breaking the machine, it would have been wise for us to have protected it with insurance. We are far more likely to become disabled then we are to die. If you’re a business owner, what happens to your business if you become disabled? Often a buy-sell agreement has been drafted when the business is set up but rarely are these agreements funded.

Funding A Buy-Sell Agreement For Death and Disability

Let’s talk about something a little different today though, still related to DI. Let’s talk about a disability buyout in coordination with a “deathtime” buy-sell agreement. Many business owners have been approached on the importance of funding their buy-sell agreement with life insurance, but far fewer have been approached about funding a disability buyout. What if we could take care of both with one policy? By utilizing a cash value life insurance policy, like an Index Universal Life, with a guaranteed death benefit out to age 95 or 100, we can accomplish this.

A properly designed IUL will accumulate cash value over time and provide a death benefit that can be used to fund the death time buy-sell agreement. Many IUL’s now have the ability to dial in a guarantee on the death benefit anywhere up to age 100! In the event that that business owner becomes disabled (far more likely than dying prematurely remember), the cash value in the policy can be used to either partially, or fully fund a disability buy-out of that business partner. Adding a waiver of premium rider to the policy will allow the business to free up some additional cash that can be used to complete the buyout. As long as the policy doesn’t lapse, the death benefit after the partner dies, can also be used to complete the buyout if it hasn’t done so already.

Choosing the right carrier and the right policy is the key to a successful buy-sell or buyout funding plan. At Life Insurance Specialists, we are here to help with just that type of design and can help our business owner clients navigate the process. 

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