Term insurance is the simplest form of life insurance. Here's how it works.
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 policyholders buys term insurance, they buy coverage for a specific period and pay a specific price for that coverage.
If the policyholder dies during that time, their beneficiaries receive the benefit from the policy. If they outlive the term of the policy, it is no longer in effect. The person would have to reapply to receive any future benefit.
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:
*College education for dependents
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.
Another factor to think about: term policies generally become more expensive as you grow older. If your term life insurance expires and you are facing certain health challenges, such as an injury or disease, you may find that a policy with similar coverage may be much more expensive.
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.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 - nbcnews.com/better/pop-culture/how-much-life-insurance-do-i-need-ncna935811 [11/24/18]
Will your accumulated assets be threatened by them?
All too often, family wealth fails to last. One generation builds a business – or even a fortune – and it is lost in ensuing decades. Why does it happen, again and again?
Often, families fall prey to serious money blunders. Classic mistakes are made; changing times are not recognized.
Procrastination. This is not just a matter of failing to plan, but also of failing to respond to acknowledged financial weaknesses.
As a hypothetical example, say there is a multimillionaire named Alan. The named beneficiary of Alan’s six-figure savings account is no longer alive. While Alan knows about this financial flaw, knowledge is one thing, but action is another. He realizes he should name another beneficiary, but he never gets around to it. His schedule is busy, and updating that beneficiary form is inconvenient.
Sadly, procrastination wins out in the end, and as the account lacks a payable-on-death (POD) beneficiary, those assets end up subject to probate. Then, Alan’s heirs find out about other lingering financial matters that should have been taken care of regarding his IRA, his real estate holdings, and more.1
Minimal or absent estate planning. Every year, there are multimillionaires who die without leaving any instructions for the distribution of their wealth – not just rock stars and actors, but also small business owners and entrepreneurs. According to a recent Caring.com survey, 58% of Americans have no estate planning in place, not even a basic will.2
Anyone reliant on a will alone risks handing the destiny of their wealth over to a probate judge. The multimillionaire who has a child with special needs, a family history of Alzheimer’s or Parkinson’s, or a former spouse or estranged children may need a greater degree of estate planning. If they want to endow charities or give grandkids a nice start in life, the same applies. Business ownership calls for coordinated estate planning and succession planning.
A finely crafted estate plan has the potential to perpetuate and enhance family wealth for decades, and perhaps, generations. Without it, heirs may have to deal with probate and a painful opportunity cost – the lost potential for tax-advantaged growth and compounding of those assets.
The lack of a “family office.” Decades ago, the wealthiest American households included offices: a staff of handpicked financial professionals who worked within a mansion, supervising a family’s entire financial life. While traditional “family offices” have disappeared, the concept is as relevant as ever. Today, select wealth management firms emulate this model: in an ongoing relationship distinguished by personal and responsive service, they consult families about investments, provide reports, and assist in decision-making. If your financial picture has become far too complex to address on your own, this could be a wise choice for your family.
Technological flaws. Hackers can hijack email and social media accounts and send phony messages to banks, brokerages, and financial advisors to authorize asset transfers. Social media can help you build your business, but it can also expose you to identity thieves seeking to steal both digital and tangible assets.
Sometimes a business or family installs a security system that proves problematic – so much so that it is turned off half the time. Unscrupulous people have ways of learning about that, and they may be only one or two degrees separated from you.
No long-term strategy in place. When a family wants to sustain wealth for decades to come, heirs have to understand the how and why. All family members have to be on the same page, or at least, read that page. If family communication about wealth tends to be more opaque than transparent, the mechanics and purpose of the strategy may never be adequately explained.
No decision-making process. In the typical high net worth family, financial decision-making is vertical and top-down. Parents or grandparents may make decisions in private, and it may be years before heirs learn about those decisions or fully understand them. When heirs do become decision-makers, it is usually upon the death of the elders.
Horizontal decision-making can help multiple generations commit to the guidance of family wealth. Estate and succession planning professionals can help a family make these decisions with an awareness of different communication styles. In-depth conversations are essential; good estate planners recognize that silence does not necessarily mean agreement.
You may plan to reduce these risks to family wealth (and others) in collaboration with financial and legal professionals. It is never too early to begin.
1 - thebalance.com/what-is-a-payable-on-death-or-pod-account-3505252 [1/15/19]
2 - cbsnews.com/news/failing-to-have-a-will-is-one-of-the-worst-financial-mistakes-you-can-make [3/13/19]
A look at where stocks were in 2009 and how they have performed since.
Where were you on March 9, 2009? Do you remember the headwinds hitting Wall Street then? When the closing bell rang at the New York Stock Exchange that Monday afternoon, it marked the end of another down day for equities. Just hours earlier, the Wall Street Journal had asked: “How Low Can Stocks Go?”1
The Standard & Poor’s 500 stock index answered that question by sinking to 676.53, even with mergers and acquisitions making headlines. The index was under 700 for the first time since 1996. The Dow Jones Industrial Average tumbled to a closing low of 6,547.05.2
To quote Dickens, “It was the best of times, it was the worst of times.” It was the bottom of the bear market – and it was also the best time, in a generation, to buy stocks.2
The next day, a rally began. Buoyed by news of one major bank announcing a return to profitability and another stating it would refrain from further government bailouts, the Dow rose 597 points for the week ending on March 16, 2009. On March 26, the Dow settled at 7,924.56, more than 20% above its March 9 settlement. The bull market was back.3
This bull market would make all kinds of history. In fact, it would become the longest bull market in history – at least by one measure.2
While the last 10-plus years have seen some big ups and downs for the benchmark S&P 500, the index has never closed more than 20% below a recent peak in that span, meaning the current bull market is more than 10 years old.2
Ten years later (at the close on Friday, March 8, 2019), the S&P 500 had risen 305.5% from that low. The Dow had gained 288.7%.2
How about the Nasdaq Composite? 483.94%. (As you look at these impressive numbers, remember that past performance may not be indicative of future results.)4,5
Those gains did not come without turbulence, and stocks in no way turned into a “sure thing.” The risk inherent in the market is still substantial along with the potential for loss. The lesson this long bull market has taught is simply that the bad times in the stock market are worth enduring. Good times may replace those bad times more swiftly than anyone can anticipate.
1 - forbes.com/2010/03/06/march-bear-market-low-personal-finance-march-2009.html [3/6/10]
2 - thestreet.com/investing/stocks/bull-market-10th-anniversary-14891697 [3/10/19]
3 - tinyurl.com/yyhbtfw8 [4/2/19]
4 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=03%2F09%2F2009&x=0&y=0 [4/2/19]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F08%2F19&x=0&y=0 [4/2/19]
Coverage can be a great comfort, even in youth.
The transition to adulthood is an exciting new stage that marks true independence. You may have graduated from college, taken your first job, and even, rented your first apartment. With this new freedom comes real responsibilities, including protecting yourself from the financial risks that life presents.
Auto. Once you are no longer covered on your parents’ policy, you will need to find insurance coverage in your name. It can be expensive for a young driver, so consider shopping around for the best rates and learn the myriad of ways to reduce this cost, such as coverage and deductible elections, the type of car you own, and available discounts.
Renters. If you are moving into an apartment, you should consider renters insurance. You may not think you’ve accumulated much in value, but when you calculate the cost of replacing your computer, electronic equipment, HDTV, clothes, etc., it can total thousands of dollars. Renters insurance can be inexpensive. When shopping for a policy, ask about whether it includes liability coverage, which can protect you in the event you are sued by someone who is injured while in your apartment.1
Health. Health care coverage is frequently obtained through your employer. However, if your employer does not offer a health insurance program, you have two choices for obtaining coverage.
The first is to maintain coverage through your parents’ health insurance plan. Federal law permits parents to keep adult children on their plan up to age 26. This choice may be relatively inexpensive, so you may want to ask your parents to inquire what the monthly premium is to add you to their plan.
The second option is to purchase a policy, directly, either through a private insurer, the federal health insurance exchange (HealthCare.gov), or through a state exchange, if available in your state of residence.2
Disability. Your single most valuable asset is your future earning power. Your ability to work and earn an income is essential when it comes to your financial survival. Incurring a disability, even for a short period of time, can have substantial economic consequences, making disability insurance one of the most important insurance needs at this stage of life.
Life. Since a young, single adult typically does not have other people depending upon their ability to earn a living (e.g., children, dependent parents), some believe the need for life insurance is minimal.
However, due to a long life expectancy at this young age, life insurance coverage can be very inexpensive. You may want to consider obtaining some coverage to take advantage of low rates and good health, in advance of a time when you will have dependents.
Extended Care. Given limited financial resources, extended care insurance may be a low priority. Nevertheless, you may want to have a conversation with your parents about how extended-care insurance may protect their financial security in retirement.
Making these decisions signals that a young adult has achieved a new level of maturity and responsibility. While it may seem overwhelming at first, conversations with a trusted financial professional may assist you in finding coverage that both meets your needs and fits within your budget. It may turn out to be a decision that means a great deal to you in the years to come.
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.
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.
1 - thebalance.com/best-rental-insurance-4158701 [9/20/2018]
2 - transamericacenterforhealthstudies.org/affordable-care-act/consumer-categories[12/13/2018]
Even the most seasoned investors are prone to their influence.
Investors are routinely warned about allowing their emotions to influence their decisions. They are less routinely cautioned about letting their preconceptions and biases color their financial choices.
In a battle between the facts & our preconceptions, our preconceptions may win. If we acknowledge this tendency, we may be able to avoid some unexamined choices when it comes to personal finance; it may actually “pay” us to recognize our biases as we invest. Here are some common examples of bias creeping into our financial lives.1
Valuing outcomes of investment decisions more than the quality of those decisions. An investor thinks, “I got a great return from that decision,” instead of thinking, “that was a good decision because ______.”
How many investment decisions do we make that have a predictable outcome? Hardly any. In retrospect, it is all too easy to prize the gain from a decision over the wisdom of the decision, and to, therefore, believe that the decisions with the best outcomes were in fact the best decisions (not necessarily true).
Valuing facts we “know” & “see” more than “abstract” facts. Information that seems abstract may seem less valid or valuable than information that relates to personal experience. This is true when we consider different types of investments, the state of the markets, and the health of the economy.
Valuing the latest information most. In the investment world, the latest news is often more valuable than old news, but when the latest news is consistently good (or consistently bad), memories of previous market climate(s) may become too distant. If we are not careful, our minds may subconsciously dismiss the eventual emergence of the next bear (or bull) market.
Being overconfident. The more experienced we are at investing, the more confidence we have about our investment choices. When the market is going up and a clear majority of our investment choices work out well, this reinforces our confidence, sometimes to a point where we may start to feel we can do little wrong, thanks to the state of the market, our investing acumen, or both. This can be dangerous.
The herd mentality. You know how this goes: if everyone is doing something, they must be doing it for sound and logical reasons. The herd mentality is what leads many investors to buy high (and sell low). It can also promote panic selling. Above all, it encourages market timing – and when investors try to time the market, they frequently realize subpar returns.
Sometimes, asking ourselves what our certainty is based on and what it reflects about ourselves can be a helpful and informative step. Examining our preconceptions may help us as we invest.
1 - forbes.com/sites/theyec/2018/12/14/three-psychological-biases-that-prevent-effective-financial-management [12/14/18]
Three common misconceptions to think about.
1 – Assuming retirement will last 10-15 years.
When Social Security was created in the 1930s, the average American could anticipate living to age 58 as a man or 62 as a woman. By 2014, life expectancy for the average American had increased to 78.6. That said, an average like may bely the fact that many retirees could live well into their nineties or beyond.1,2
Assuming you will only need 10- or 15-years’ worth of retirement money could be a big mistake.
2 – Assuming too little risk.
Holding onto your retirement money is certainly important, but so is your retirement income and quality of life. While overall inflation has been below 3% for most of the past 10 years, your personal inflation rate may be higher. In that situation, your dollar gradually buys less and less. If your income doesn’t keep up with inflation – essentially, you end up living on yesterday’s money.
For this reason, a flexible retirement strategy will likely factor in many situations and scenarios; you cannot plan for every single scenario, but considering many possibilities may give you and your financial professional numerous options down the road.
3 – Assuming you will be in excellent health. While it’s true that we lead healthier lives than our ancestors and that medical science and awareness of fitness and nutrition have improved and extended many American lives, that improvement doesn’t cover every issue that comes with advanced age. Extended-care issues can sap away retirement funds.3
Recent findings by the U.S. Department of Health and Human Services offer some perspective: over a quarter of all people who have turned 65 between 2015-2019 are probably going to need $100,000 of extended care, while 15% of that same group is looking at $250,000.3
For these reasons, a retirement strategy should include some thinking about paying for extended care of this sort. Yes, Medicare can help you with the basics, but an insurance strategy that can accommodate longer hospital stays and care should also be a part of your thinking.3
Remember that good strategies also change over time, and you will probably want some help along the way. Make time to discuss these common assumptions, and how to avoid them, with your retirement professional.
1 - ssa.gov/history/lifeexpect.html [2/19/19] 2 - pbs.org/newshour/health/american-life-expectancy-has-dropped-again-heres-why [11/29/18] 3 - kiplinger.com/article/insurance/T036-C000-S002-how-to-afford-long-term-care.html [1/31/19]