Wednesday, February 23, 2011

Wednesday, February 16, 2011

Won't Medicaid pay for my Long Term Care?

Medicaid will cover long term care expenses, but only after assets and income have been spent down making the remaining spouse, if any, "impoverished". Assets that need to be spent down include retirement and brokerage accounts, savings, CD's and social security income. Medicaid will allow for an impoverished spouse to keep only 1 car, 1 home, and a very limited monthly income. Any additional vacation homes,vehicles, monthly income or anything with real value needs to be sold, and proceeds used to pay for long term care needs. Medicaid usually requires an annual audit of finances to make sure that the impoverished spouse still qualifies for the assistance. For any additional information on this subject, feel free to contact us with your questions.

Thursday, February 10, 2011

Universal Life Insurance

Universal Life Insurance

Universal life insurance (UL) is a form of permanent life insurance just like whole life insurance. Unlike a whole life policy however, a universal life policy is a flexible premium life contract. This means that a universal life policy will pay for itself out of the policies' cash value, if enough present, without any direction from or loan fees to the policy holder. (A whole life policy can pay for itself, if set up properly at issue, but the policy owner needs to request from the issuing company, at each billing cycle, that the whole life policies' dividends pay the premiums due.)

Just like whole life coverage a universal life policy will build cash value on a part of the premiums paid into to the policy. The rate of growth of the cash value depends on the investment history of the issuing company. The amount of premiums paid into a UL that is credited with a return depends on the net amount risk to insurance carrier. The net amount at risk is the difference between a UL's cash value and the net death benefit. For example, if you were to purchase a UL policy for $250,000 at age 35, then the costs for year 1 would be based on an annual renewable term (ART) policyinside the UL contract. The costs for a term policy for $250,000 on a 35 year old happened to be $200 for the first year and the policy holder paid $1,000 into the policy. So, the additional $800 of the premium paid into the UL was credited with a return based on the issuing companies investment history for that year. In year two the net amount risk to the carrier is reduced by the amount of cash value in the contract, in this example the insurance company paid a 7% return on the remaining $800, crediting $56 dollars to the cash value. The new net amount at risk to the insurance carrier in year 2 is $250,000 - $856 (the cash value + the prior years return) = $249,144. This process compounds annually and can really add up fast. This will reduce the net amount at risk, the cost of insurnace and fatten up the policies' cash value. Just like whole life insurance, a UL policy builds cash value on a tax-free basis and can even be accessed tax-free if done correctly. The annual renewable term policy that is the "chassis" of the UL does ratchet up each year with your age, this allows the insurance carrier to offset the risks of an aging group of policy holders, but these increases in age considerations are offset by the cash value building and the net amount at risk reducing. The morale of this story is to find a good agent that can explain the moving parts inside a universal life policy and that will review the policy regularly with you. A UL policy that is set-up correctly is a very powerful cash accumulation and tax-advantaged tool. The death benefit is tax-free and can be much higher than the cash value in the contract.

Listed below are the different forms of UL coverage:

Current Assumption Universal Life (UL) - explained above, credits the policies' cash value with a fixed interest rate that is on par with market interest rates. A good current assumption UL will have a floor of guaranteed interest, to make sure that some kind of return is realized each year. For example, a current assumption UL that we recommend today has a guaranteed rate of 3%, but is currently crediting 2010 low interest rates of 4.5%.

Indexed Universal Life (IUL) - participates in market indicies, one of the most popular is the Standard & Poor's 500. The S&P 500 is an indicie of 500 of the largest capitilized companies traded on the New York Stock exchange and the NASDAQ. An IUL policy is credited with the growth of the indicie that it is attached to, subject to a cap rate. (E.g.- If the S&P 500 increases 20% in a year and the policy cap is 12%, then the policy is credited 12%.) Just like a current assumption UL, a IUL usually has a floor, or guaranteed rate of return during the negative years. An IUL that we recommend today has a 12% cap rate and a 1% floor.

Guaranteed Universal Life (GUL) - is a guaranteed UL product. Most GUL's are not designed to build much if any cash value; this keeps the premiums lower. As long as the policy owner pays the premiums as scheduled the death benefit is guaranteed to the age illustrated or the policy's maturity date. We currently recommend a GUL that has no cash value and premiums so low, that we refer to it as "term till death".

Tuesday, February 1, 2011

LIFE Foundation - The Insurance Word Blog - The Magic of Life Insurance

LIFE Foundation - The Insurance Word Blog - The Magic of Life Insurance

New Long Term Care Product

There is a new Long Term Care product, offered by a large reputable insurance company, that now covers 80% of your Long Term Care expenses. This policy is easy to understand and offers great piece of mind. The level nature of the benefits help prevent premium increases in later years of the policy.
A 60 year old, standard health rated, married man can get 80% of his long term care covered up to $100,000 for only $990.28 a year. This $100,000 lifetime benefit will have guaranteed increases to help off set inflation.
For any more information on this great LTCI product feel free to contact us.