Category: Education

Using Life Insurance to Prevent Asset Loss

Clients today are  more concerned than ever before with loss of their assets due to a variety of factors threatening their wealth, including increased litigation risk, decreased compensation and earnings, stalled or negative investment momentum and, of course, the uncertainty surrounding pending estate tax increases. Thanks to the laws in many states that protect the cash value of life insurance policies, you can now be part of a solution to these exposures. In many states life insurance is creditor-protected by statute to an unlimited dollar amount. Most states have specific guidelines and definitions as to how the policies are structured in terms of owners and beneficiaries, and the level of protection varies widely from state to state. By understanding and using these statutes, you can convert exposed assets (cash) subject to creditor risk to protected assets with a death benefit.  But why would anyone consider allocating cash to insurance? There are several good reasons…. Cash is at an all-time high. Even with the threats to wealth outlined earlier, we have more liquid wealth on the sidelines than ever before (trillions of dollars in cash, by some accounts) due to the perceived current instability of both the stock market and real estate. In most cases, even for legally and financially sophisticated people, this cash is unprotected and exposed to any source of creditor risk or liability. Bank solvency risk continues. A recent report...

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Single Premium: A Lifetime Protection Without a Lifetime of Payments

Definition of Single-Premium Life Insurance: An insurance plan in which a lump sum of cash is paid up front to guarantee payment to beneficiaries. Because single-premium policies are instantly fully funded, the money invested builds up rapidly because the policy is fully funded, making for a potentially sizeable benefit even in the event of the policyholder’s sudden death. Following the Tax Reform Act of 1986, this type of insurance policy became a popular tax shelter. There are a couple of popular single-premium policies: Single-premium whole life, which offers a fixed interest rate paid by the insurance company which taken on any potential risk rather than the policy holder; and Single-premium variable life, which allows policy owners to select from a menu of professionally managed financial portfolios. LIVING Benefits of SPL Consider unexpected expenses that can crop up in old age. You probably understand the importance of LTC insurance, but suppose you have put off buying this  coverage because of high annual premiums? Single-Premium Life Insurance can offer a solution. Some SPL policies will give you tax-free access to the death benefit to pay for long-term care expenses. This feature can help protect your other assets from the potentially overwhelming cost of long-term care. The death benefit remaining in the policy when you die will pass income-tax free to your beneficiaries. And if you don’t use any of it, the money will...

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Savings Based Insurance

The Benefits of Savings Based Insurance Tax Deferred Growth Legacy funds for your loved ones or favorite charity Additional resources for long term or chronic medical care Money back and benefit guarantees for ANY reason Consider the Goal of your Savings Assets Interest Rate Growth: Clients want to know that their money is secure. Keeping money in a traditional savings account or CD typically ensures a low interest rate that will not grow their money exponentially but can give clients peace of mind due to lack of volatility. Clients want to know that when they need it, their funds will be there. There are a number of short term liquidity needs and these are important factors to discuss when considering the benefits of Savings Based Insurance. Legacy Funds: With traditional savings vehicles death and estate taxes combined with a myriad of legal fees can often severely diminish and even deplete the funds clients wish to pass on to their loved ones or favorite charity. Savings based insurance can minimize the amount of taxes taken out of legacy funds and remove the need for costly legal representation which means more of  your clients hard earned savings goes to their intended recipient. Long Term Care & Chronic Illness: The sad truth is that today 62% of bankruptcies in the US are attributed to Medical Expenses. People are living longer than ever and any good retirement plan...

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Term Conversion & the Importance of Life Insurance Review

Term life insurance lasting for only a certain number of years can be a bargain. But if clients don’t convert their policy into permanent coverage when they have the chance, it can also prove to be a very costly mistake. Term coverage is often referred to as temporary insurance which guarantees a fixed benefit if the policyholder dies during the term. A good example is a 20-year term policy with a death benefit of $200,000. That policy may only cost $35 a month, and if the policyholder dies before the 20 years end, the carrier pays the death benefit. While financial advisors market term insurance as an affordable way of protecting against financial disaster, they should also warn against sitting on a policy until it is too late to replace it with a permanent option, because if the policyholder outlives the term, their contract expires and the insurance company keeps the premiums. Term is typically written as temporary insurance and is not designed to pay out on the majority of policies inforce. Term policies that promise to pay huge dividends cost a fraction compared to most permanent options. Young families are typically good customers for term insurance because in many cases the primary provider wants to purchase a large amount of insurance to support an unemployed spouse or young children in the event that he or she dies young....

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