One of the many services Select Portfolio Management, Inc. provides is an “insurance assessment”. We can review your various forms of insurance to ensure you are using the various forms of insurance effectively throughout your wealth management plan.
In our experience performing “insurance assessments” for all of our clients, we have found that life insurance, long term care insurance and disability insurance are not being effectively used and integrated into existing wealth management plans.
Life Insurance
With its combination of favorable tax treatment, cash value growth, death benefit protection, premium flexibility, and investment flexibility, life insurance is a great solution for many financial needs that go far beyond traditional death benefit protection. Essential to protecting your legacy, a properly structured life insurance policy can become an integral piece of your overall wealth management plan.
Some of the key life insurance applications are:
- Income protection for beneficiaries
- Asset Protection
- Tax-Advantaged Savings & Investments
- Tax-Advantaged Retirement Income
- College Funding
- Charitable Giving
- Estate Planning tool
- Pays federal & state estate taxes
- Increase wealth & liquidity outside taxable estate (Irrevocable Life Insurance trust)
- Business
- Funding Buy-Sell agreements
- Key person Insurance
- Executive Bonus plans
- Non-Qualified Deferred Compensation plans
- “Split Dollar” policies
- Captive Insurance Company
- Welfare Benefit Trust
Life insurance in Retirement Planning is a strategy to provide life insurance protection and the potential for supplemental retirement income. A flexible premium universal life insurance policy can help you protect your family and may also be able to help supplement your retirement income needs.
Read further articles and details on how to use Life Insurance to help your wealth management plan in our Resource Library.
Long Term Care Insurance
What Is Long Term Care?
Long term care is assistance-in-living that must be provided for an individual due to illness or injury. This may include full skilled care for the bed-ridden patient, or may only involve some assistance with Activities of daily living such as bathing, dressing, toileting, administering medication, etc. These services may be provided in the home, a long term nursing facility or an assisted-living facility.
Neither Health Insurance nor Disability Insurance will cover what Long Term Care Insurance provides.
The issue aging baby-boomers need to address is not long term care insurance, but long-term care. Failure to consider the consequences of needing long-term care risks the emotional and physical health of your family and the integrity of your retirement portfolio. The question is not “Who will take care of you when you live a long life and need care”, but “What impact will providing long term care to you have on your family and retirement portfolio?”
Why is the need for LTC increasing?
“Baby-Boomers” are reaching retirement age and are living longer. Unhealthy lifestyles are increasing the risk of stroke (3rd leading cause of death and # 1 cause of disability) and advancements in medical technology is prolonging life for victims of heart attack, stroke, diabetes, dementia, MS, Parkinson’s, and auto & sports accidents.
What are the chances that I will need Long Term Care?
Industry studies indicate that approximately half of all persons reaching age 65 will need long term care. LTC Insurance is NOT “Senior Insurance”. Forty percent of people needing LTC are working age adults, ages 18-64.
How much does it cost?
Costs vary greatly depending on nature of service provided and geographic location. Skilled care (the highest level of care within a long term nursing facility) can cost $4,000 to $6,000 monthly. The approximate range for Southern California is $175 - $250/day or $5000 - $7500/month. With the average range of time requiring long term care being 3-6 years, this can become a $180,000 - $540,000 expense.
You will be taken care of whether you own long term care insurance or not. Long-Term Care Insurance pays for the types of care your family and friends will find most time consuming, stressful, difficult, and perhaps financially costly. It allows your spouse or children to maintain their relationship with you as a spouse or child supervising your care, not providing it.
Read further details on Long Term Care in our "Wealth Protection" section of our Resource Library
Disability Income Insurance
If you are like most people, everything you have or hope to have for yourself and your family requires that you continue to earn an income. Income is the foundation that supports your expenses, your lifestyle and your future plans.
If income is interrupted because of an accident or sickness, it may be difficult or impossible to provide basic family needs. Short range commitments and long-term plans may have to be delayed or even cancelled.
Unfortunately the chance of a disabling accident or sickness interrupting your ability to continue earning an income is a distinct possibility.
What are the chances that I will be disabled?
The odds of becoming disabled are greater at any age than are the odds of dying at that same age; yet many working adults have not made any provision to manage this risk. In many ways, disability is a more expensive risk to manage, since income flow would stop, as in the event of death; but in addition to that, there are usually extra medical and care-giving costs which actually increase the cost of living.
You might be surprised to learn what poses the greatest threat during the course of one year. Your odds for risk are:
1 out of 114 that you will die
1 out of 96 that you will have a fire
1 out of 21 that you will have a disabling accident
1 out of 5 that your auto will be damaged in an accident
Source: Field Guide 2001, National Safety Council, World Almanac
Insurance industry studies indicate the odds of becoming disabled vs. dying increase over time.
At Age 27 = 2.7 times greater
At Age 42 = 3.5 times greater
At Age 52 = 2.2 times greater
You, like most people, probably couldn’t sleep at night without home owners insurance and life insurance, But looking at the statistics above, havng a disabling accident is approximately five times more likely to happen than having a home fire or you dieing.
If you do not have disability income insurance, you are protecting the assets you already obtained, but are overlooking the greatest asset you have………your INCOME.