Assess Life Insurance Needs

Tip: Final Cost. Paying for a funeral can be a financial burden on a family. Make sure your estate management will provide your loved ones with sufficient funds to cover this important cost.

If your family relies on your income, it’s critical to consider having enough life insurance to provide for them after you pass away. But too often, life insurance is an overlooked aspect of personal finances.

In fact, according to a study conducted by LIMRA, which closely follows life insurance trends, less than half of U.S. households say they have individual life insurance coverage, and 40% of Americans say they need more coverage.1

Recognizing the role life insurance can play in your family finances is an important first step. A critical second step is determining how much life insurance you may need.

Rule of Thumb

One widely followed rule of thumb for estimating a person’s insurance needs is based on income. Some will say a person needs a life insurance policy that is five times his or her annual income. Others recommend up to ten times annual income.

But if you are looking for a more accurate estimate, consider completing a “DNA test.” A DNA test is a Detailed Needs Analysis that takes into account a wide range of financial commitments to help better estimate insurance needs.

The first step is to add up needs and obligations.

Short-term needs

Which funds will need to be available for final expenses, such as a funeral, final medical bills, and any outstanding debts, such as credit cards or personal loans? How much to make available for short-term needs will depend on your individual situation.

Long-Term Needs

How much will it cost to maintain your family’s standard of living? How much is spent on necessities like housing, food, and clothing? Also, consider factoring in expenses such as travel and entertainment. Answering the question, “What would it cost per year to maintain this lifestyle?” is good place to start.

New Obligations

What additional expenses may arise in the future? What family consideration will need to be addressed, especially if there are young children? Will aging parents need some kind of support? How about college costs? Factoring in potential new obligations allows for a more accurate picture of ongoing financial needs.

Next, subtract all current assets available.

Fast Fact: 70% of households say they would have trouble covering everyday living expenses within months of a primary wage-earner’s death.
Source: LIMRA, 2016

Liquid Assets

Any assets that can be redeemed quickly and for a predictable price are considered liquid. Generally, houses and cars are not considered liquid assets since they may require time to sell. Also, remember that selling a home or a car may adjust a family’s current standard of living.

Your Life Insurance Need

Needs and obligations — minus liquid assets — can help you get a better idea about the amount of life insurance coverage you may need. While this exercise is a good start to understanding your insurance needs, a more detailed review may be necessary to better assess your situation.

  1. LIMRA, 2016

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

A Look at Whole Life Insurance

Whole life insurance remains in force for your whole life, as long as you remain current with your premiums.

In exchange for fixed premiums, the insurance company promises to pay a set benefit when the policyholder dies. Whole life insurance policies build up cash value — effectively a cash reserve that pays a modest rate of return. This growth is tax deferred. Guarantees are based on the claims-paying ability of the issuing company.

Most whole life insurance policies will let policyholders borrow a portion of their policy’s cash value under fairly favorable terms. And interest payments on policy loans go directly back into the policy’s cash value.*

When the policyholder dies, his or her beneficiaries receive the benefit from the policy. Depending on how the policy is structured, benefits may or may not be taxable.

*Whether whole life insurance is the best choice for you will depend on a variety of factors, including your unique goals, needs, and circumstances. Understanding how a whole life insurance policy works will enable you to make an intelligent, informed choice.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments. Life insurance is not FDIC insured. It is not insured by any federal government agency or bank or savings association.

Generally, loans taken from a policy will be free of current income taxes, provided certain conditions are met, such as the policy does not lapse or mature. Keep in mind that loans and withdrawals reduce the policy’s cash value and death benefit. Loans also increase the possibility that the policy may lapse. If the policy lapses, matures, or is surrendered, the loan balance will be considered a distribution and will be taxable.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Is Term Life Insurance for You?

Term insurance is the simplest form of life insurance. It provides temporary life insurance protection on a limited budget. Here’s how it works:

When a policyholder buys term insurance, he or she buys coverage for a specific period and pays a specific price for that coverage.

If the policyholder dies during that time, his or her beneficiaries receive the benefit from the policy. If he or she outlives the term of the policy, it is no longer in effect. The person would have to reapply to receive any future benefit.

Fast Fact: More than one-third (38%) of those who purchased life insurance in 2015 purchased term life insurance.
Source: ACLI, 2016

Unlike permanent insurance, term insurance only pays a death benefit. That’s one of the reasons term insurance tends to be less expensive than permanent insurance.

Many find term life insurance useful for covering specific financial responsibilities if they were to die unexpectedly. Term life insurance is often used to provide funds to cover:

  • Dependent care
  • College education for dependents
  • Mortgages

 

Would term life insurance be the best coverage for you and your family? That depends on your unique goals, needs, and circumstances. You may want to carefully examine the pros and cons of each type of life insurance before deciding what type of policy will be the best fit for you.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Universal Life Insurance

Universal life insurance is permanent life insurance — that is, it remains in force for your whole life. But universal life insurance has an important difference from other types of permanent insurance: it provides a flexible premium.

That means the policyholder decides how much to put in above a set minimum. By extension, the policyholder also determines the face amount of the policy.

Universal life insurance policies accumulate cash value — cash value that grows tax deferred. Guarantees are based on the claims-paying ability of the issuing company.

Universal life insurance policies normally let policyholders borrow a portion of their policy’s cash value under fairly favorable terms. And interest payments on policy loans go directly back into the policy’s cash value.*

When the policyholder dies, his or her beneficiaries receive the benefit from the policy. Depending on how the policy is structured, benefits may or may not be taxable.

*Universal life insurance has certain features that make the policy suitable for some individuals. Whether universal life insurance is appropriate for you will depend on your goals, needs, and circumstances.

Accessing the cash value in your insurance policy through borrowing — or partial surrenders — has the potential to reduce the policy’s cash value and benefit. Accessing the cash value may also increase the chance that the policy will lapse and may result in a tax liability if the policy terminates before your death.

Universal life insurance can be structured so that the cash value that accumulates will eventually cover the premiums. However, additional out-of-pocket payments may be required if the policy’s dividend decreases or if investment returns underperform.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Withdrawals of earnings are fully taxable at ordinary income tax rates. If you are under age 59½ when you make the withdrawal, you may be subject to surrender charges and assessed a 10% federal income tax penalty. Also, withdrawals will reduce the benefits and value of the contract. Life insurance is not FDIC insured. It is not insured by any federal government agency or bank or savings association.

Generally, loans taken from a policy will be free of current income taxes, provided certain conditions are met, such as the policy does not lapse or mature. Keep in mind that loans and withdrawals reduce the policy’s cash value and death benefit. Loans also increase the possibility that the policy may lapse. If the policy lapses, matures, or is surrendered, the loan balance will be considered a distribution and will be taxable.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Variable Universal Life Insurance

Variable universal life insurance is permanent life insurance—it remains in force for the policyholder’s whole life. And, as with universal life insurance, it provides a flexible premium and an adjustable benefit—meaning the policyholder decides how much to put in the policy above a set minimum. By extension, the policyholder also determines the face amount of the policy.

The difference between variable universal life insurance and other types of permanent insurance is that the policyholder directs how premiums are invested. This provides access to the potentially higher returns provided by the financial markets. It also means returns could underperform those provided by other life insurance products.

Generally, there are several subaccounts in which the policyholder may choose to invest. There may be a fixed-interest option as well as various stock, bond, or money-market choices. Guarantees are based on the claims-paying ability of the issuing company.

Like other types of permanent life insurance, policyholders can even borrow a portion of their policy’s cash value under fairly favorable terms. And interest payments on policy loans go directly back into the policy’s cash value.*

When the policyholder dies, his or her beneficiaries receive the benefit from the policy. Depending on how the policy is structured, benefits may or may not be taxable.

Variable universal life insurance has unique features that may be attractive to some insurance buyers. However, a variable universal life insurance policy also has options that must be clearly understood before an individual commits to a policy.

*Generally, loans taken from a policy will be free of current income taxes provided certain conditions are met, such as the policy does not lapse or mature. Keep in mind that loans and withdrawals reduce the policy’s cash value and death benefit. Loans also increase the possibility that the policy may lapse. If the policy lapses, matures, or is surrendered, the loan balance will be considered a distribution and will be taxable.

Accessing the cash value in your insurance policy through borrowing—or partial surrenders—has the potential to reduce the policy’s cash value and benefit. Accessing the cash value may also increase the chance that the policy will lapse and may result in a tax liability if the policy terminates before your death.

Variable universal life insurance can be structured so that the cash value that accumulates will eventually cover the premiums. However, additional out-of-pocket payments may be required if the policy’s dividend decreases or if investment returns underperform.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Withdrawals of earnings are fully taxable at ordinary income tax rates. If you are under age 59½ when you make the withdrawal, you may be subject to surrender charges and assessed a 10% federal income tax penalty. Also, withdrawals will reduce the benefits and value of the contract. Life insurance is not FDIC insured. It is not insured by any federal government agency or bank or savings association. Depending on the performance of variable life and variable universal life insurance, the account value will fluctuate with changes in market conditions. At any time, the account value may be worth more or less than the original amount invested in the policy.

Please consider the investment objectives, risks, charges, and expenses before investing. Variable life and variable universal life insurance are sold by prospectus only. Information on fees and expenses can be found in the prospectus or obtained from your financial professional. Please read the prospectus carefully before you invest or send money.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

What to Look for in a Long-Term Care Policy

Tip: How Old Are You? Age can makes a difference in the cost of a long-term care policy. Generally, the older you are when you purchase a policy, the higher you can expect the premiums to be.
Source: U.S. Department of Health and Human Services, 2015

Long-term care insurance is one of the most complex types of insurance you may consider purchasing. Here’s a list of 10 questions to ask that may help you better understand the costs and benefits.

What types of facilities are covered? Long-term care policies can cover:

  • Nursing home care
  • Home health care
  • Respite care
  • Hospice care
  • Personal care in your home
  • Assisted living facilities
  • Adult day-care centers
  • Other community facilities

Many long-term care policies cover some combination of these. Be sure to understand what facilities are included when you’re considering a policy.

What is the daily, weekly, monthly benefit amount? Policies normally pay benefits by the day, week, or month. You may want to evaluate what long-term care facilities in your area are charging before committing to a policy.

What is the maximum benefit amount? Many policies limit the total benefit they’ll pay over the life of the contract. Some state this limit in years, others in total dollar amount. Be sure to address this question.

What is the elimination period? Benefits don’t necessarily start when you enter a nursing home. Most have an elimination period—a period during which the insured is responsible for the cost of care. In many policies, elimination periods can range from zero to 100 days after nursing home entry or disability.

Does the policy offer inflation protection? Adding inflation protection to a policy may increase its cost, but it could be important if long-term care services increase in price.

How are benefits triggered? Insurance companies use specific criteria to trigger benefits. The most common is inability to do a certain number of the activities of daily living without assistance. The six activities of daily life used by most insurance companies are:

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

Many policies also have benefits for Alzheimer’s disease or other forms of dementia.

Fast Fact: Costly Care. The national average cost of care in a skilled nursing facility is $91,250 a year. Care in an assisted living center averages $43,200 a year.
Source: Genworth 2015 Cost of Care Survey

Is the policy tax qualified? Certain long-term care policies can offer federal income tax benefits. Generally, premiums paid for these policies can be included with other uncompensated medical expenses for deduction from income if they exceed 7½% of adjusted gross income. And benefits received generally will not be counted as income.1

How strong is the insurance company? There are several companies that analyze the financial strength of insurance companies. The ratings can show you how industry watchers view various insurance companies.

What other policy options are available? There are a number of other long-term care policy options you may want to consider. Waiver of premium allows premiums to be discontinued once benefits are triggered. Third-party notice requires the insurance company to notify a third party whenever premiums have been missed — so the insured can have a child or trusted advisor make certain premiums are paid.

There are many factors to consider when reviewing long-term care programs. The best policy for you may depend on a variety of factors, including your unique circumstances and financial goals.

Touch of Grey

In 1900, the average person lived to age 47. The average life expectancy stood at 78.8 years in 2014, the most recent figures available.

Source: Centers for Disease Control and Prevention, 2015

1. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Understanding Long-Term Care

Tip: Won’t Medicare Pay for It? After a three–day hospital stay, Medicare will cover the first 20 days in a skilled nursing care facility completely. For the next 80 days, it will cover all but $157.50 per day. And after 100 days, it won’t cover anything.
Source: Centers for Medicare and Medicaid Services, 2015

Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

The U.S. Department of Health and Human Services estimates that 70% of people over age 65 can expect to need long-term care services at some point in their lives.1 So understanding the various types of long-term care services—and what those services may cost—is critical as you consider your retirement approach.

What Is Long-Term Care?

Long-term care is not a single activity. It refers to a variety of medical and non–medical services needed by those who have a chronic illness or disability—most commonly associated with aging.

Long-term care can include everything from assistance with activities of daily living—help dressing, bathing, using the bathroom, or even driving to the store—to more intensive therapeutic and medical care requiring the services of skilled medical personnel.

Long-term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.

How Much Does Long-Term Care Cost?

Fast Fact: Getting Care Now. Some 1.4 million adults live in skilled nursing facilities. Another 4.8 million remain in their own homes but get help with personal care from other people.
Sources: CDC, 2015. (Data from 2013 report is the latest available.)

Long–term care costs vary state–by–state, and region–by–region. The national average for care in a skilled care facility (single occupancy in a nursing home) is $91,250 a year. The national average for care in an assisted living center (single occupancy) is $43,200 a year. Home health aides cost a median $20 per hour, but that rate may increase when a licensed nurse is required.2

What Are the Payment Options?

Often, long-term care is provided by family and friends. Providing care can be a burden, however, and the need for assistance tends to increase with age.4

Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.

Many self-insure by default—simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.

When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concepts are important to you, consider your approach for long-term care.

The Best-Laid Plans

Source: U.S. News and World Report, November 13, 2015

1. U.S. Department of Health and Human Services, 2015
2. Genworth 2015 Cost of Care Survey

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Keep Your Umbrella Handy

Tip: Before the Umbrella. Before becoming eligible for umbrella insurance, you may have to maximize coverage on your homeowner’s and car insurance policies, as these become deductibles to an umbrella policy.

In 2015, the U.S. had a record 10.4 million millionaires, up from 10.1 million in the previous year. An increase in personal wealth may bring greater financial flexibility; it may also bring greater liability. Individuals with high net worth, or those who are perceived to have high net worth, may be more likely to be sued. And personal injury claims can reach into the millions.1

Umbrella liability insurance is designed to put an extra layer of protection between your assets and a potential lawsuit. It provides coverage over and above existing automobile and homeowner’s insurance limits.

For example, imagine your teenage son borrows your car and gets in an accident, seriously injuring the other driver. The accident results in a lawsuit and a $1 million judgment against you. If your car insurance policy has a liability limit of $500,000, that much should be covered. If you have additional umbrella liability coverage, your policy can be designed to kick in and cover the rest. Without umbrella coverage, you may be responsible for paying the other $500,000 out of pocket, which could mean liquidating assets, losing the equity in your home, or even having your wages garnished.

Umbrella liability insurance is usually sold in increments of $1 million and generally costs just a few hundred dollars a year. It typically covers a broad range of scenarios, including bodily injuries, property damage caused by you or a member of your household, even libel, slander, false arrest, and defamation of character.

Deciding whether liability coverage is right for you may be a question of lifestyle. You might consider buying a policy if you:

  • Entertain frequently and serve your guests alcohol
  • Operate a business out of your home
  • Give interviews that may be published
  • Employ uninsured workers on your property
  • Drive a lot of miles or have teenage drivers
  • Live in a manner that gives the appearance of wealth
  • Have a dog, especially if the breed is known to be aggressive
  • Own jet skis, a boat, motorcycles, or snowmobiles

Even if you don’t yet have a tent in the millionaire camp, you may want to consider the benefits of liability insurance. You don’t have to be a millionaire to be sued for a million dollars. Anyone who is carefully building a financial portfolio may want to limit their exposure to risk. Umbrella liability can be a fairly inexpensive way to help shelter current assets and future income from the unexpected.

This is a simplified description of coverage. All statements made are subject to the provisions, exclusions, conditions and limitations of applicable insurance policies. Please refer to actual policy documents for complete details regarding coverage.

Who’s Got What?

In 2015, there were more than 29 million households in the United States whose net worth was in the $100,000 to $1 million range (excluding primary residence). Only 145,000 households had a net worth of $25 million or more.

Chart Source: Spectrem Group, 2016

1. Spectrem Group, 2016

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Disability and Your Finances

Tip: Business Interest. Businesses may purchase disability insurance to protect a business or dissolve its assets if an important employee or owner becomes disabled.

The Social Security Disability Insurance program paid out $141.7 billion in benefits in 2014. And with a rush of new applicants lining up each year, the system is expected to exhaust its reserves at the end of 2016 if changes aren’t made.1

Rather than depending on a government program to protect their income in the event of a disability, many individuals prefer to protect themselves with personal disability insurance.2

Disability insurance provides protection by replacing a portion of your income, usually between 50% and 70%, if you become disabled as the result of an injury or illness. This type of safeguard may have considerable benefits since a disability can be a two-fold financial problem. Those who become disabled often find they are unable to work and are also saddled with unexpected medical expenses.

What About Workers’ Comp?

Many people think of workers’ compensation as a disability safety net. But workers compensation pays benefits only to individuals who become disabled while at work. If your disability is the result of a car accident or other off-the-job activity, you may not qualify for worker compensation.

Even with workers compensation, each state makes its own rules about payment and benefits, so coverage may vary considerably. It might make sense to find out what your state offers and plan to supplement coverage on your own, if necessary, especially if you have a high-risk profession. Likewise, if you have an active lifestyle that puts you at a higher risk of disability, considering an extra layer of protection may be an option.

If you become disabled, personal disability insurance can be structured to pay a benefit weekly or monthly. And benefits are not taxable, if you have paid the premiums in full.2

When you purchase a policy, you may be able to tailor coverage to suit your needs. For example, you might be able to adjust benefits or elimination periods. You might opt for comprehensive protection or decide to define coverage more specifically. Some policies also offer partial disability coverage, cost-of-living adjustments, residual benefits, survivor benefits, and pension supplements. Since coverage is designed to replace income, most people choose to purchase protection only during their working years.

Even as changes are made to federal disability programs, they typically provide only modest supplemental income, and qualifying can be difficult. If you don’t want to rely solely on Uncle Sam in the event of an unforeseen accident or illness, disability insurance may be a good way to protect your income and savings.

Out of Commission

According to the most recent data available, about 41% of disabled Americans are employed, compared with nearly 79% of non-disabled Americans.

Chart Source: ACLI Life Insurers Fact Book 2015

  1. Social Security Administration, 2015
  2. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Federal and state laws and regulations are subject to change, which would have an impact on after-tax investment returns. Please consult legal or tax professionals for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Term vs. Permanent Life Insurance

The adequacy of life insurance coverage in the U.S. is shrinking, according to LIMRA, which keeps close tabs on the industry. In 2010, households had enough coverage, on average, to replace 3.5 years of income. Today they have enough to replace only 3 years’ income.

Furthermore, 4 in 10 households with children under age 18 said they’d be in immediate financial trouble if the primary wage earner died today.1

When considering life insurance, one of the most important factors to understand is the difference between term and permanent insurance. Here’s an inside look at both.

Term and Perm

Term life insurance is temporary; it provides a death benefit for a specific term, such as 10, 20, or 30 years. Unlike other types of life insurance, it does not accumulate a cash value. If the policyholder dies during that term, his or her beneficiaries receive the benefit from the policy. When the contract ends, so does the coverage.

This limited term leads to term life insurance’s main advantage: price. Generally, term life insurance costs less than permanent life insurance, especially if the purchaser is younger. This has the potential to free up funds for other household expenses.

Permanent insurance remains in place as long as the policyholder makes payments. In addition, permanent policies are designed to build up “cash value,” a cash reserve that accumulates with the policy. Typically, this cash reserve pays a modest rate of return. However, the policyholder has limited access to the funds.

Which Should You Choose?

Term life insurance can be designed to provide protection against upcoming expenses, such as putting children through college. Permanent life insurance, on the other hand, can be more useful for covering long-term financial needs, such as estate planning.

Many people find that they have a combination of short- and long-term needs. In such circumstances, it may be prudent to have both types: a basic level of permanent life insurance supplemented by a term policy. A review of your situation may help determine what type of life insurance is appropriate.

Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Term or Perm?

In 2015, (the most recent year for which statistics are available), people purchased more permanent life insurance policies than term life insurance policies.

Source: American Council of Life Insurers, 2016

  1. LIMRA, 2016

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.