How To Protect Yourself From The Unexpected

Last time we talked about the three pillars of protection for you and your family: Disability, Life and Health insurance, with our primary focus on disability insurance. This time we will cover life insurance protection. If someone is depending on you, whether you work outside of the home or you are a home-maker, it is important to have adequate coverage. No one knows when they are going to go and that is why it is so important to protect yourself against the unexpected.

If you are a single mom who is raising children on your own, it vital that you protect your children’s future. Getting life insurance could be the most important thing that you could ever do for your children. If something were to happen to you, who would provide for your children? Would it be your ex-husband, your parents, a nanny, etc.? In either case, money will be required. Don’t assume that someone will step up to the plate to provide for your kids when you die. It would be a shame for your children to struggle and you could have provided it!

A common question that is, how much coverage should I have? The minimum recommended amount is six times your annual salary. So if you make $50,000 per year before taxes, you would need $300,000 at MINIMUM. If you have a lot of debt (cars, homes, credit cards, etc.) your coverage amount could be as high as twenty times your annual income. This is a decision that you will have to make for yourself, but whatever you decide, make sure that the premium is an amount that will be sustainable for future payments. Your life insurance is not something that you want to cut corners with.

There are two main types of life insurance: term and permanent. Term Life Insurance is when you make payments to a life insurance company for a certain amount of time, say ten years. Keep in mind that you will be protect only for that amount of time. One of the advantages of this type of policy is it is very cheap and generally easy to get. Permanent Life Insurance protects you for your entire life, as long as you make your payments. It is known by several different names: whole life, final expense, burial, universal life and variable life. It can be a little more expensive than term life simply because once you get it, it’s yours for life.

I am really passionate about people having life insurance and knowing the amount of coverage the policy provides. Here’s why, when I was growing up I remember he “insurance man” coming by my grandparents’ house to collect their premium for their policy. My family thought that my grandmother’s policy would more than cover her final expenses once she passed. My grandmother passed away from a heart attack many years later. Imagine our surprise when we found out that her policy was worth only $500! It is always worth the time and effort of founding out the worth of your policy, if it’s still in effect and who the beneficiaries are. A good insurance professional will check with his or her clients at least once a year to see if any life changes have taken place in their lives.

If you don’t have an agent to help you with your needs, my firm would be available to provide you the services that you need. Simply drop us an email: contact@totalbenefitsllc.com or give us a call: 205-378-9352.

Financial Safety Net for Women – Part 2

Last week we discussed the importance of building a form financial foundation. This week we will cover the first step; pouring and solidifying the concrete. This step involves meeting with an insurance agent and/or a financial advisor so you can complete a survey entitled a fact finder (needs analysis). This fact finder will uncover where you are financially and where you want to be in the future. It will formulate a plan for your financial objectives and goals. Some of the questions on the survey are: 1) Where day you want to be in 5, 10, 20, 40 years? 2) Do you need long-term care coverage? 3) How much life insurance do you need? 4) How much money should you have in savings for emergencies, etc.

Women are especially vulnerable in planning for their financial future. Schedule an appointment with an agent or planner to get started building your foundation.

Estate Planning

■ Make tax-free gifts. Under current federal law, you can give up to $13,000 to as many people as you wish each year. This is a great way to reduce the size of your estate (and potentially save estate taxes) over time. For example, if you give $13,000 per year to your two children and three grandchildren, you would remove $65,000 from your estate in just one year and $325,000 in five years. (You can double these amounts if you are married.) Charitable gifts are unlimited. So are gifts for tuition and medical expenses, if you give directly to the institution.
■ Secure/update health care documents. At the minimum, everyone over the age of 18 needs 1) a durable power of attorney for health care, which gives another person legal authority to make health care decisions (including life and death decisions) for you if you are unable to make them for yourself; and 2) HIPPA authorizations, which give written consent for doctors to discuss your medical situation with others, including family members.

In addition, a revocable living trust* is preferable over a will at incapacity because it can prevent the court from controlling your assets.
■ Review/update guardian for minor kids. It is quite likely that the person you name as guardian for your children when they are small will not be the best choice as they get older. Also, this person could change his/her mind, move away or even become ill or die. Revisit your choice from time to time, and name more than one in case your first choice cannot serve. Remember, if you haven’t named a guardian who is able and willing to serve and something happens to you, the court will decide who will raise your kids.
■ Review/update beneficiary designations. This is especially important if your beneficiary has died or if you are divorced. If your beneficiary is incapacitated or is a minor, setting up a trust for this person and naming the trust as beneficiary will prevent the court from taking control of the proceeds.
■ Review/update your insurance. Check the amount of your life insurance coverage and see if it meets your family’s current needs. Consider getting long-term care insurance** to help pay for the costs of long-term care (and preserve your assets for your family) in the event you and/or your spouse should need it due to illness or injury.
■ Talk to your children about your estate plan. You don’t have to show them bank and financial statements, but you can talk in general terms about what you are planning and why. The more they understand it, the more likely they are to readily accept it — and that will help to avoid discord after you are gone. You can also talk to them about your values and the opportunities that money can provide. Even better, show your values by doing — the holidays are an excellent time for families to do charitable work together.
■ Get basic documents for your unmarried kids who are over 18. Unmarried adults (18 and over) need to have a durable power of attorney for health care and HIPPA authorization, so you can act on their behalf in a medical emergency. And, while you’re at it, go ahead and have your attorney prepare a simple will and durable power of attorney. Hopefully, these will not be needed, but if an event does occur, you will be glad you have them.

*A revocable living trust may be amended, altered or revoked by its settlor at any time, provided the settlor is not mentally incapacitated. Revocable trusts are becoming increasingly common in the US as a substitute for a will to minimize administrative costs associated with probate and to provide centralized administration of a person’s final affairs after death.

**Long-term care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for long periods of time.