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.

Not Having Money Is The Root Of Evil… Here’s Why

Once a woman takes control of her finances, she will never be powerless again. The growing power of women and finances is not some fly by night fad. It is the new normal in American households. 73% of households in the US are managed by single moms or women who are the primary breadwinner of the family and because of this fact; women need to have a handle on how to become more money savvy.

We often hear that money is the root of all evil. I think that NOT having money is the root of evil. Here’s why…I was at home on a rainy Sunday afternoon and was looking at a program on T.V. called “Snapped”. This particular episode involved a woman who grew up being spoiled by her widowed mother. The young lady was an only child and stood to inherit her mother’s fortune. Now there is nothing wrong with that because parents are told to build an inheritance for future generations (Proverbs 13:22). How did this whole scenario go wrong? The young lady and her boyfriend plotted and killed her mother to get the inheritance sooner than she was entitled.

Now I know this is an extreme case, but I’m sure that you can think of other examples where the lack of money caused people to do desperate things.

Starting here and now, I want you to start thinking about where you are financially and where you want to be in 5, 10, 30 years from now. You can’t get there unless you know where you are now. We have all seen the infomercials where the advisor tells the client that she can’t afford that $200 camera and maybe she can’t right now, but I have yet to see that same advisor show her client a clear path to how to get there. Whatever path you start on it has to be sustainable and fun or it won’t work in the long run.

The lesson take-away this week is, start where you are, you don’t have to be rich to start building an inheritance for you and your child. Next week, we will share a plan to get started.

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.

Financial Safety Net for Women – Part 1

We are starting a new series for women. This series will focus on areas that are of importance to women, their families and their businesses. Statistics has shown that if we aren’t already, most of us will be the sole person responsible for our financial security. A woman who is out of the workforce due to family obligations or illness will have a longer recovery period financially than her male counterparts. On average, it takes about five years to make up for every one year of absence.

We are all concerned about retirement and investments but to have a strong foundation we must start with protection. Our next blog will cover creating a financial safety net for women.

Disability Insurance is the forgotten insurance

The importance of auto, health, homeowners and life insurance is well known. But disability coverage, which replaces lost earnings if you can’t work, tends to be ignored — until you need it.

Government studies show that a 20-year-old worker has a 30 percent chance of becoming disabled before reaching full retirement age. Yet only about a third of employees in private industry have long-term disability insurance, according to the Bureau of Labor Statistics.

“It could be argued that the disability of a breadwinner is worse than the death of a breadwinner,” says James Hunt, insurance actuary for the Consumer Federation of America, “because the disabled person is still soaking up money.”

That’s why it makes sense to purchase individual coverage if you’re self-employed — or not covered sufficiently or at all by your employer.

A look at what you need to know about disability insurance:

Q: How does disability insurance work?
A: Disability insurance protects from a loss of income resulting from an inability to work due to an accident or illness. You typically receive disability checks starting three to six months after you become unable to work.

There are three sources of this coverage: The Social Security Administration, employers and private insurers.

— Social Security Disability Insurance is the bedrock protection against disability. About 153 million workers are insured by the program through FICA taxes. But it has a very strict definition of disability and it can take two years or more to be approved for benefits.

— Many employers offer disability coverage through a group plan, which pays a specified portion of your salary.

— Private insurance coverage is most often sought out by high-income professionals such as doctors and lawyers who have made a huge investment in their earnings potential; self-employed workers, and executives looking for supplemental coverage.

Q: Do you need to buy coverage if you receive disability insurance through your employer?
A: It depends whether you could get by on the benefit checks. A typical group plan replaces just 40 percent to 60 percent of your salary, up to a maximum $5,000 a month or $60,000 a year. And if the employer pays your premiums, the checks will be taxable.

Benefits can last for either a set number of years or until retirement age. Check your plan’s details closely. Company benefits have been steadily shrinking in recent years. Group policies often limit the duration of benefits to only two years if you can’t perform your job duties.

If your policy looks insufficient, ask your employer whether you can pay for additional coverage. Otherwise, consider getting extra insurance from a private insurer to extend the duration or bring the coverage up to 70 percent or 80 percent of income.

Q: Why can’t you count on Social Security Disability Insurance to cover your needs if you are disabled?
A: The average disability benefit is just $1,111 a month, based on payments by the Social Security Administration this month to 8.8 million beneficiaries. And you only qualify for it if you are unable to work in any capacity, not just at your chosen occupation. A list of conditions that are considered disabling is available by doing a search for “disability evaluation” at the agency’s website, http://www.ssa.gov .

Q: What should you look for in a policy?
A: If you have a highly specialized job or can simply afford to pay the premiums, it’s worth paying extra to have an “own occupation” policy. This coverage pays benefits if you are unable to perform the major duties of your own occupation. To trim some of the costs, it may be advisable to obtain “own occupation” coverage for one or two years and “any occupation” coverage after that.

The length of benefits is key, and will affect the cost of premiums significantly. Some policies pay benefits until age 65 or until your full retirement age for Social Security benefits, others for two or five years. Seek out a non-cancellable policy.

You probably also want a policy that will pay “residual” benefits, which will compensate for a decline in income if you are able to work at a new job that pays less.

Q: How much does disability insurance cost?
A: Prices vary based on age, gender, occupation, amount of coverage and health status. Check with a broker to get quotes from at least three different insurers.

For someone who does not have coverage at work, a plan with all the extras including inflation protection costs roughly 2 percent to 2.5 percent of annual salary for a man, and 3 percent to 4 percent for a woman. Women pay more because they file claims more frequently and for a longer duration than men.

If someone has coverage at work but wants earnings to boost benefits to 80 percent salary replacement, the annual cost is typically about 1 percent of the worker’s salary.

~ via Business Week

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.

Small Business Planning Part 2

Life insurance can be structured to fund a “buy-sell” agreement. This is an agreement among owners to buy a deceased owner’s share of the business at a previously agreed upon price in the event of death, disability or retirement.

Why are these agreements so important? You might think that if you die, your family could maintain their income by running the business themselves or by hiring someone to handle the day-to-day management. The fact is, your loved ones may not have the skills or the desire for the job, and your co-owners may not welcome the idea of an unintended partner. With a properly structured and funded buy-sell agreement, your business partners won’t have to scramble to come up with the money to buy out your share of the business and you’ll be guaranteed that your survivors will be compensated fairly and promptly.

Buy-sell agreements are typically funded by life insurance policies purchased on the lives of each of the business owners. The amount is usually specified in a contract created with the help of an attorney. You can enter into a buy-sell agreement at any time, but it often makes sense to do so when a business is formed or when new owners are brought into the business. Because business values can fluctuate, it’s important to review the contract with your accountant at least once per year or to include a calculation method in the agreement. Also be sure the insurance coverage funding the agreement is up to date.

Though not as common as insuring against death, business owners can also insure against the risk of becoming disabled and unable to work. In this case, disability income buyout insurance would fund the buy-sell agreement, allowing the disabled owners to be bought out, typically after a one-year waiting period.

~ Lifehappens.org