Menu

Simon McGowan

About Simon McGowan

Posts by Simon McGowan:

Business owner standing in a woodworking shop with employees working in the background.

What Is Key Person Insurance—and Does Your Business Need It?

What would happen to your business if an essential owner or employee died?

You might lose sales, delay projects, or need to hire a replacement quickly. Meanwhile, payroll, rent, and loan payments would continue.

Key person insurance can help a business manage that financial disruption. It provides funds after an insured person’s death, subject to the policy’s terms.

What is key person insurance?

Key person life insurance is coverage on someone whose loss would significantly affect a business financially.

Typically, the business owns the policy, pays the premiums, and receives the death benefit. The insured person might be an owner, partner, or essential employee.

Unlike personal life insurance intended to support a family, this coverage protects the business.

Who is a key person in your business?

Start by asking whose absence would be hardest to manage.

For example, your business might depend heavily on:

  • An owner who generates most of the revenue.

  • A salesperson who manages major client relationships.

  • A specialist with skills that are difficult to replace.

  • An operations manager who keeps projects and staff on track.

  • A partner whose knowledge is essential to delivering your services.

Job titles alone don’t determine the need. Instead, consider the person’s financial contribution and how long replacing that contribution could take.

How can key person insurance help?

A death benefit can give the business money and time to respond. Depending on its needs and obligations, the business could use those funds for:

  • Recruiting and training a replacement.

  • Maintaining payroll and other operating expenses.

  • Managing a temporary reduction in revenue.

  • Paying business debts.

  • Bringing in temporary management or specialist support.

Insurance cannot replace someone’s relationships or experience. However, it can help reduce the financial pressure while the business adjusts.

A small-business example

Imagine a company where one employee manages its largest customer accounts.

If that person died, the owner might need to take over those relationships immediately. As a result, other work could slow down.

The company might also face recruiting expenses and a period of lower sales.

Key person life insurance could provide funds to help manage those costs. However, the appropriate coverage amount would depend on the company’s finances and the employee’s role.

This is an illustration, not a coverage recommendation.

How much key person insurance does a business need?

There isn’t one formula that fits every company.

First, estimate the financial disruption the person’s death could create. Then consider the resources needed to keep operating during the transition.

Useful questions include:

  • How much revenue or profit depends on this person?

  • What would recruiting and training a replacement cost?

  • How long might the transition take?

  • What debts and ongoing expenses would remain?

  • How much cash does the business already have available?

An insurance professional can help assess those needs. The insurer will also review the financial justification and the person’s insurability.

Does key person life insurance cover disability?

Life insurance pays a death benefit when the insured dies, subject to the policy terms. It does not automatically replace business revenue if that person becomes disabled.

Separate key person disability coverage may help address that risk. Its benefits depend on the policy’s definition of disability, waiting period, and other terms.

Therefore, consider both risks when reviewing your business protection.

Is key person insurance the same as buy-sell funding?

They address different needs.

Key person insurance helps the business manage the financial loss of an essential person. In contrast, a buy-sell agreement establishes how an owner’s interest may transfer after a specified event.

Life insurance may help fund a purchase following an owner’s death. However, policy ownership and beneficiaries must align with the agreement.

A business may need both forms of planning. Don’t assume one policy will provide enough money for operating needs and an ownership buyout.

What should you consider before purchasing coverage?

Term and permanent life insurance may both be considered for key person protection. The appropriate choice depends on the coverage period, budget, and business objectives.

Also, coordinate the arrangement with your attorney and tax professional. Employer-owned life insurance can involve advance notice, written consent, and ongoing reporting requirements.

Tax treatment depends on the arrangement and compliance with applicable rules.

For additional background, visit the Insurance Information Institute’s guide to insuring against the loss of key personnel.

Review your business’s dependence on key people

A useful starting point is simple: identify the people your business relies on most.

Next, consider the financial consequences of losing them. Insurance can support that planning alongside documented procedures, staff training, and succession arrangements.

At Life Insurance Specialists, we help Colorado business owners evaluate life and disability insurance options.

Contact Simon McGowan, CLU®, to discuss key person insurance and your business’s protection needs.

Parent reading a picture book with two young children on a sofa at home.

Do Stay-at-Home Parents Need Life Insurance?

When you think about life insurance, you may think first about replacing a paycheck. But what about the parent who stays home?

Stay-at-home parents provide childcare, transportation, meals, and countless other forms of support. Although that work doesn’t come with a salary, replacing it can create significant expenses.

Life insurance for stay-at-home parents can help give a family financial flexibility during an already difficult time.

Why insure a parent who doesn’t earn a paycheck?

If a stay-at-home parent died, the surviving parent might need to pay for services the family previously handled at home.

They might also need to reduce their working hours or take time away from work to support their children and adjust to new responsibilities.

A life insurance benefit can help cover those costs and give the family more choices about what comes next.

What expenses should you consider?

Every household is different. When reviewing your needs, consider:

  • Childcare: Daycare, after-school programs, summer care, or a nanny.

  • Household help: Cleaning, meal preparation, and other everyday responsibilities.

  • Transportation: Help getting children to school, appointments, and activities.

  • Time away from work: Financial support if the surviving parent takes leave or reduces their hours.

  • Final expenses: Funeral costs and other immediate financial needs.

  • Future goals: Education expenses or other priorities you want to protect.

The purpose isn’t to put a dollar value on a parent. It’s to understand the financial impact their absence could have on the household.

How much life insurance does a stay-at-home parent need?

There isn’t one coverage amount that works for every family.

Start by estimating the additional annual expenses your household could face. Then consider how many years you might need that support, along with immediate expenses and resources already available.

For example, a family with preschool-aged children may need paid childcare for longer than a family whose children are nearly independent.

Your budget matters, too. The goal is to find coverage that addresses your needs and that you can comfortably maintain.

Is term life insurance an option?

Term life insurance provides coverage for a specified period. It may fit a family whose main concern is protection during the years when children depend most heavily on their parents.

The appropriate coverage period depends on your children’s ages, household responsibilities, and financial goals. Other policy types may be worth considering if your needs extend beyond those years.

Coverage availability and amounts depend on the insurer’s underwriting guidelines and your individual circumstances.

Review coverage for both parents

A family’s financial security depends on more than its earned income.

When reviewing life insurance, consider both parents’ contributions—including unpaid work—and how those responsibilities may change as your children grow.

If you already have policies, review the coverage amounts, beneficiaries, and remaining coverage periods before making changes.

For additional information, read The Stay-at-Home Parent’s Guide to Buying Life Insurance from Life Happens.

Let’s talk about your family’s needs

At Life Insurance Specialists, we help Colorado families understand their options and choose protection that fits their needs and budget.

Contact Simon McGowan, CLU®, to discuss life insurance for stay-at-home parents and review your family’s coverage.

Parents and two children walking together on a grassy trail with mountains in the background.

Is Employer Life Insurance Enough?

Many workplaces offer life insurance as part of their benefits package. It’s a valuable benefit—but is employer life insurance enough to protect your family?

The answer depends on your coverage amount, your household’s financial needs, and what happens to the policy if you change jobs. Here’s what to review before deciding whether additional personal coverage makes sense.

What does your employer life insurance cover?

Start by checking your benefits summary. Find out how much life insurance your employer provides and whether you can purchase additional coverage through the plan.

Then compare that benefit with what your family would need if you were no longer here. Consider:

  • Mortgage payments and other debts.

  • Everyday household expenses.

  • Childcare and household support.

  • Future education expenses.

  • How long your family would need financial assistance.

A benefit that covers immediate expenses may still leave a gap in your family’s longer-term needs.

What happens if you leave your job?

Employer life insurance is connected to your eligibility under the workplace plan. Leaving your job, retiring, or changing your employment status may affect your coverage.

Some plans offer portability, which may allow you to continue coverage, or conversion, which may allow you to change to an individual policy. Availability, costs, application deadlines, and policy terms vary.

Before making a job change, ask your benefits administrator what options apply to your coverage.

How individual life insurance can help

An individual life insurance policy is purchased separately from your employer’s benefits. It can provide coverage that continues through job changes, as long as the policy remains in force under its terms.

It also allows you to choose a coverage amount and policy type based on your needs.

Term life insurance provides protection for a specified period. Permanent life insurance is designed for longer-lasting protection, subject to its funding requirements and policy terms. The appropriate choice depends on your goals and budget.

An individual policy may complement your workplace coverage, but additional insurance isn’t automatically necessary for everyone.

Is employer life insurance enough for your family?

A useful starting point is to ask:

  • How much coverage do I currently have?

  • Who depends on my income or the support I provide?

  • What expenses would my family need help covering?

  • What savings and other resources would be available?

  • What happens to my coverage if I leave my employer?

These questions can help you identify whether there is a gap—and how much additional protection you might need.

Review your options before making changes

Employer life insurance can be an important part of your protection plan. The goal is to understand how it fits your family’s needs and whether individual coverage would add value.

If you already have coverage, review it carefully before making changes. Keep existing protection in place while any new application is being evaluated, and confirm that replacement coverage is active before canceling a policy.

For more information, visit the NAIC’s consumer guide to life insurance.

At Life Insurance Specialists, we help Colorado individuals and families understand their coverage and compare their options.

Contact Simon McGowan, CLU®, to review your employer life insurance and explore whether additional coverage fits your needs.

Blue digital illustration of a Colorado home representing life insurance and mortgage protection.

How Much Life Insurance Do Colorado Homeowners Need

Why Life Insurance Matters for Colorado Homeowners

Owning a home is a significant achievement. It’s a place to build memories, raise a family, and create a legacy. But what happens to your loved ones and that legacy if something unexpected happens to you?

This is where life insurance steps in as the ultimate protection plan for homeowners. It’s more than just safeguarding your family’s financial future; it’s about ensuring your castle stays theirs.

Peace of Mind for Your Mortgage

Let’s face it, most homes come with a mortgage. Life insurance, particularly term life insurance, can be a lifesaver (quite literally) for your beneficiaries.

A term life insurance policy with a death benefit comparable to your outstanding mortgage can provide your family with the financial resources to pay off the loan or continue making monthly payments. They won’t be burdened with hefty monthly payments, allowing them to focus on grieving and adjusting to life without you.

For additional guidance on choosing the right coverage, the National Association of Insurance Commissioners (NAIC) offers a helpful consumer resource explaining life insurance options and important considerations when purchasing a policy.

Beyond the Mortgage: Financial Security

Life insurance goes beyond just the mortgage. Owning a house comes with a variety of ongoing expenses. Property taxes, utilities, and maintenance costs can add up quickly.

A life insurance payout can act as a financial buffer, providing your family with the resources they need to cover these costs and maintain their comfortable lifestyle in their home.

More Than Just a Roof Over Their Heads

Imagine your children don’t have to worry about selling the house to pay for college. Perhaps your spouse can use the payout to invest or pay off lingering debts. Life insurance gives your loved ones the flexibility to make financial decisions based on their needs, not out of desperation.

Investing in Your Legacy

Owning a home is about building something that lasts. Life insurance allows you to extend that legacy beyond the physical structure. The financial security it provides ensures your family can continue to build their own dreams and memories within the walls you created.

Taking the Next Step

Now that you understand the importance of life insurance for homeowners, it’s time to explore your options. Consider consulting with a licensed insurance professional to discuss your specific needs and find a policy that perfectly complements your castle and your family’s future.

Remember, life insurance isn’t just about financial security; it’s about peace of mind. It’s the key that unlocks the door for your loved ones to continue living their lives securely and comfortably in the home you built together.

Protect Your Home and Your Family

At Life Insurance Specialists, we help Colorado homeowners compare life insurance options to find coverage that fits their mortgage, financial goals and budget.

Contact us today for a free, no-obligation life insurance quote.

Annuities for retirement income and retirement planning

Building Your Own Pension: How Annuities Can Help Create Retirement Income

 

 

Building Your Own Pension: How Annuities Can Help Create Retirement Income

For generations, pensions provided retirees with a predictable paycheck for life. Today, fewer workers have access to traditional pensions, which has led many people to consider annuities for retirement income as one way to create a dependable income stream in retirement.

Today, traditional pensions are much less common, leaving many retirees responsible for turning their own savings into reliable retirement income.

That’s where an annuity may be useful.

Certain annuities can convert a portion of your retirement savings into a predictable stream of income—including income that can be guaranteed for life. In that sense, an annuity can help you create something that looks a lot like your own personal pension.

Why Consider an Annuity for Retirement Income?

Predictable Income

One of the biggest challenges in retirement is figuring out how much you can safely spend.

Investment accounts fluctuate with the market, and withdrawing too much during a downturn can put additional pressure on a retirement portfolio.

An annuity with an income guarantee can provide a predictable payment regardless of day-to-day market movements. Depending on the type of annuity and options selected, those payments may continue for a specified period or for the rest of your life.

That can make budgeting for recurring expenses in retirement considerably easier.

Protection Against Outliving Your Income

No one knows exactly how long retirement will last.

A longer life is something to celebrate, but it also creates a financial challenge: your retirement assets may need to support you for 20, 30 or even more years.

Certain annuities can provide guaranteed lifetime income, helping address what is often called longevity risk—the risk of outliving the assets you’ve accumulated for retirement.

The guarantees of an annuity are subject to the claims-paying ability of the issuing insurance company.

Tax-Deferred Growth

Another feature of annuities is tax deferral.

With a non-qualified annuity, you generally don’t pay income tax on growth inside the contract as it occurs. Instead, taxes are generally due when taxable gains are withdrawn.

Withdrawals of taxable amounts are generally subject to ordinary income tax, and withdrawals made before age 59½ may also be subject to a 10% federal additional tax, subject to applicable exceptions.

An annuity purchased within an IRA or another tax-qualified retirement account does not provide additional tax deferral beyond what the retirement account already provides.

Different Annuities for Different Retirement Needs

“Annuity” describes a broad category of insurance products rather than one specific strategy. Different types of annuities are designed to accomplish different things.

Immediate Annuities

With a single-premium immediate annuity, you generally give an insurance company a lump sum in exchange for an income stream that begins relatively soon.

You may be able to structure payments for a set number of years, for your lifetime, or for the joint lifetimes of you and your spouse.

This can be one of the more direct ways of turning a portion of accumulated savings into pension-like income.

Deferred Annuities

A deferred annuity allows money to accumulate before income begins.

Depending on the contract, growth may be based on a declared fixed interest rate, the performance of an underlying investment portfolio, or changes in a market index subject to the terms and limitations of the contract.

Fixed Annuities and MYGAs

A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that provides a guaranteed interest rate for a specified period, such as three, five or seven years.

MYGAs can be useful for people who want predictable accumulation without direct exposure to stock-market losses.

They are sometimes compared with certificates of deposit because both can provide a stated rate for a defined period. However, they are very different financial products. CDs are bank products and may qualify for FDIC insurance within applicable limits. Annuities are insurance contracts, are not FDIC insured, and their guarantees depend upon the claims-paying ability of the issuing insurer.

Annuities can also have surrender charges and different tax treatment, so the interest rate alone shouldn’t determine which is appropriate.

Learn more about annuities.

Creating a “Personal Pension”

For many retirees, the objective isn’t necessarily to put all of their savings into an annuity.

Instead, an annuity can potentially be used to cover a portion of essential monthly expenses.

For example, imagine a retired household has recurring expenses for housing, utilities, groceries, insurance and healthcare. Social Security may cover part of those expenses.

An annuity could potentially be used to create another predictable income stream to help cover the remaining gap.

Other assets can then remain available for discretionary spending, emergencies, legacy goals or continued investment.

The result can resemble the retirement structure previous generations received from traditional pensions—but created using your own retirement assets.

What About Your Spouse?

Retirement income planning often needs to account for two lives rather than one.

Many annuities offer joint-life income options, which can continue payments for as long as either spouse is living.

Other contract options may provide death benefits or guarantees for a minimum payment period.

These choices matter. Adding guarantees or survivor provisions can affect the amount of income the contract provides, which is why it’s important to understand the tradeoffs before selecting an income option.

Are There Downsides to Annuities?

Yes. Annuities aren’t appropriate for everyone, and the details matter.

Depending on the product, considerations can include:

  • Liquidity: Some annuities impose surrender charges for withdrawals above permitted amounts during the surrender period.
  • Inflation: A fixed payment may lose purchasing power over a long retirement unless the contract provides some form of increasing income.
  • Growth potential: Products emphasizing guarantees may offer less upside than investments that accept greater market risk.
  • Fees and complexity: Some annuity contracts are relatively straightforward, while others include optional riders, investment expenses and additional fees.
  • Insurer strength: Annuity guarantees are based on the financial strength and claims-paying ability of the insurance company issuing the contract.

That’s one reason comparing contracts from multiple insurers can be valuable.

Is an Annuity Right for You?

There isn’t one answer for everyone.

An annuity may be worth considering if you’re approaching or already in retirement and place a high value on predictable income, principal protection, tax-deferred accumulation or protection against outliving your income.

For someone else, maintaining greater liquidity or accepting market volatility in pursuit of long-term growth may be more important.

The question isn’t simply “Are annuities good or bad?”

A better question is:

“What do I need this portion of my money to accomplish?”

Once you answer that question, it’s much easier to determine whether an annuity—and which type of annuity—belongs in your retirement strategy.

Building a More Predictable Retirement

Retirement planning has changed. Most people can no longer count on an employer pension to automatically provide a paycheck for the rest of their lives.

But that doesn’t mean predictable lifetime income has disappeared.

An annuity can potentially help turn a portion of your accumulated savings into an income stream designed to last throughout retirement. The appropriate product, amount and income option will depend on your financial situation and goals.

Want to Explore Your Options?

Life Insurance Specialists helps individuals and families compare annuity options from multiple highly rated insurance companies.

If you’re approaching retirement or simply want to understand how an annuity might fit alongside Social Security, retirement accounts and your other assets, we’re happy to help you evaluate your options.

REQUEST A FREE CONSULTATION