Why Insurance?

Building wealth and developing an income strategy are just two dimensions in a well—rounded financial plan. A third is preparing for the unexpected. Have you considered what the impact would be to your income and assets — and your family — if something were to happen to you during your working years, as well as later in life. While nobody likes to think about such unfortunate events, it's important to anticipate the potential for injury, illness or death, and how it could affect your assets and your loved ones. What expenses might you and your family incur? Would your family be able to maintain their current standard of living? Life insurance and long-term care insurance are valuable tools you can use to help manage these types of risks.

 

Life Insurance

Simply put, the goal of life insurance is to protect your family against the loss of income that would result should you or another key earner pass away. Life insurance falls into two broad categories:

• Term insurance is simply a form of life insurance that provides a preset death benefit for an established period of time — for example, you can purchase coverage for 10, 15 or 20 years. Once the policy is expired, it is up to you, the policy owner, to decide whether to renew the policy or to let the coverage lapse.
• Permanent life insurance is a broad term for life insurance that does not expire (unlike term life insurance) and combines a death benefit with a savings or investment component. With this type of policy, you get the peace of mind knowing your family is secure and, in many cases, you have the opportunity to build a cash value against which you can borrow funds, or in some instances, withdraw the cash value to help meet future goals, such as paying for a child's college education.*

In addition, these policies can also have tax benefits. The cash value typically compounds on a tax-deferred basis, which means you pay no taxes on any earnings as long as the policy remains active. Loans and withdrawals up to the total premium payments are typically tax-free, while other types of withdrawals may be subject to income tax.**

The main types of permanent life insurance are whole life, universal life, and variable life. Your financial advisor can help you examine the different features and determine which type of policy is for you.

It is a good idea to re-evaluate your life insurance policies annually or when you experience a major life event such as marriage, divorce, the birth or adoption of a child, or purchase of a major item such as a house or business.

 

Long-Term Care Insurance

Long-term care is the type of ongoing assistance and/or supervision people need when they are unable to perform normal daily activities on their own, such as bathing, dressing, eating, or getting in and out of bed. The need for long-term care can arise from physical limitations or a cognitive impairment, such as Alzheimer's disease, and can result from an injury or illness, or simply due to the normal aging process.

The cost of long-term care can be expensive, depending on the type of care you need, how long you need it, and where care is received. In 2008, the national average cost of long-term care for one year in various settings were:

The cost of care is also rising. In 30 years, long-term care is projected to cost over $250,000 per year.¹ That's $750,000 to $1,250,000 for a three-to five-year care event.

And the odds of needing care are pretty high. At least 70% of people over age 65 are expected to need long-term care services at some point in their lives.² And of those who currently have long-term care needs, 41% are under age 65.³

Long-term care (LTC) insurance helps you to feel confident about your future. By purchasing coverage when you are relatively young and healthy, it's a cost-effective way for you to plan ahead for your future long-term care needs. When you incorporate LTC insurance into your financial plan, you can help secure your future by helping to protect your retirement assets, reduce the burden of care that often falls on family members, and maintain choice, control, and independence in your later years should you need care.

As always, any financial decision needs to take into consideration your unique goals and circumstances. For more information, visit the following website and then make an appointment with your financial advisor.