Insurance

Insurance Services / Risk Protection*

What risks are you exposed to that could crumble your financial pyramid?

The largest and most important part of any pyramid is the base. The higher points of the structure may get more attention, but a strong foundation is what holds everything together. If you don't have a solid financial base, your pyramid can crumble or become severely damaged during the slightest financial storm.

Imagine requiring hospitalization, yet you have no health insurance. What would you do, cash in your mutual funds? Or imagine the small business owner who puts the bulk of his/her money in bonds, gets sued and doesn't have liability insurance.

Key components are:

• Disability Insurance
• Medical Insurance
• Life Insurance
• Long-Term Care Insurance
• Estate Planning
• The use of annuities
• Umbrella liability insurance

Does everyone need the same products? Of course not! But, you need to know what you have, why you have it and what it will and will not do. Is the pricing and value competitive?

Risk Protection & Life Insurance

Be aware of your options in the area of life insurance and position yourself more favorably when possible. Review the insurance products that you own and explore any new additions that you are considering adding to your portfolio. Ask yourself....what do you have? Why do you have it? Will it do what you want and need?

Life insurance companies, product pricing, plans of insurance and benefits have changed dramatically over the past decade. Older life insurance contracts that may be accumulating dust, rather than value, in a safe deposit box, can frequently be used to significantly improve current risk protection, tax planning, estate planning, and charitable giving situations. Many of these older generation policies are eligible for tax-free exchange to more comprehensive and compelling plans. Newer products are often better suited to meet today's more sophisticated needs and applications.

Policies That Can Be Exchanged Tax-Free*

Life Insurance Calculator

Risk Protection & Long Term Care

• The need for home owners insurance is 5 claims per every 1000 with an average claim of $3500 (House/Auto: Society of Actuaries, 1995)
• The need for auto insurance is 70 claims per every 1000 with an average claim of $3000 (House/Auto: Society of Actuaries, 1995)
• The need for Long Term Care is 600 claims per every 1000! The average claim varies form 40,000 to 80,000 per year for an average of 5 years! (LTCi: Health Insurance Assoc. of America, 1994)
• Family members and friends are the sole caregivers for 70% of elderly people (Health Insurance Assoc. of America, 1999)

** It's never too early to start thinking about long-term care insurance.

Concerns about long-term health care affect people at many ages and the need for long-term care arises when a person is unable to care for himself/herself after an injury from a major accident, or a chronic debilitating illness. As such, planning for long-term care needs and the protection of assets is a fundamental ingredient of any financial planning process. Fortunately today, Americans are not only exploring long-term care insurance plans, but they are internalizing the benefits of transferring the substantial risk of long term care expenses to an insurance company rather than being willing to accept the substantial financial burdens themselves.

Long-Term Care Calculator

The Basics of Annuities

Securing Your Financial Future

As a nation, Americans are living longer and spending more time in retirement. The average American lifespan has increased by 28 years from 1900 to 2000 and has more than doubled since our nation was founded. National Vital Statistics Report, Vol. 51, No. 3, 12/19/02, CDC).

A comfortable, secure retirement doesn't happen all by itself. It takes dedication and careful planning.

What is an Annuity?

An annuity is an investment vehicle that can guarantee that an investor will not outlive his or her income. In addition, annuities, which are tax-favored products, offer a wide variety of features designed to meet investor needs.

In its traditional form, the annuity is a contract that is purchased from a life insurance company for the purpose of providing the annuitant (the purchaser with a guaranteed monthly income for life). This income can begin immediately after purchase (immediate annuity) or at a later date (deferred annuity). The purchase may be made in installments (flexible premium or all at one (single premium)).

What are the advantages of an annuity?

Advantages are tax* deferred accumulation, a choice of variable or fixed rate returns and a flexibility that may appeal in a variety of situations.

What is the difference between a "fixed" annuity and a "variable" annuity"?

Although annuities have many distinguishing features, the two major types of annuities are the variable annuity and the fixed annuity.

Variable Rate annuities are becoming increasingly popular because in return for the assumption of greater risk, the contract owner may obtain both greater investment flexibility and a potentially higher return. The contract owner can select from among a number of separate accounts. The investment options typically include diversified stock, bond and money market funds. Most insurers also offer an extremely broad array of alternative funds such as specialized stock funds (sector funds, small-capitalization stock funds, index funds, and asset allocation funds where the company's investment manager selects portfolio weights allocating investments within the fund.)

The investment account in a fixed rate annuity operates much like the cash value account of a universal life policy. The annuity investment earns a fixed rate, which is guaranteed for the first one to five years of the contract. After that time, the rate depends on the investment success of the insurer's general portfolio (subject to a guaranteed floor, typically 3 or 4%).

Since there is a fundamental difference in the risk and return characteristics of fixed and variable annuities, each type is more or less suited to various purposes. However, some form of annuity would be indicated in the following circumstances.

1. When a tax* deferred accumulation of interest is desired. The interest earned inside an annuity owned by an individual grows income tax free and is not taxed until it is withdrawn at which point it is taxed at ordinary income.

2. When an investment with immediate and high collateral value is wanted.

3. When a person would like to avoid probate and pass a large sum of money by contract to an heir. There is no step up benefit at death as the assets are taxed at ordinary income tax rates.

4. When a measure of liquidity is desired. Owners may usually withdraw a percentage of earnings without penalty, usually 10% of account value, within limits during the accumulation phase.

5. When a person wants a retirement income that can never be outlived.

6. When a retired individual wants a monthly income competitive with other conservative investments.

Variable Annuities would be indicated:

1. When an investor wants more control over his or her investment and is willing to bear the risk associated with investment selections.

2. When a person is looking for potentially increasing retirement income.

Fixed Annuities would be indicated:

1. When safety of principal is a paramount consideration.

2. When a conservative complement to other investment vehicles is desired.

Clearly fixed annuities and variable annuities each offer distinct advantages. Be sure to choose the one that most closely matches your own investment objectives and tolerance for risk.

Note: withdrawals of taxable amounts are subject to income tax and, if taken prior to age 59½, a 10% federal tax penalty may apply. Early withdrawals may be subject to withdrawal charges. Guarantees are backed by the claims-paying ability of the issuer.

Variable Annuity Calculator

Estate Planning

A substantial part of an estate may be used to pay expenses, leaving only a small residue available for heirs and beneficiaries. Taxes, fees, debts and administrative expenses all must be paid before an estate can be settled. Thus, knowledge of what has happened to other estates is valuable when developing an estate plan.

 

 

Estate Tax Planning Calculator

To receive quotes or to obtain additional information, contact our Director of Insurance Services by clicking here.

*Please read the tax & investment disclaimer accessible on the home page.

1Provided payments begin no later than under the old contract. Endowment

2Contracts must meet definition of life insurance. In Letter Ruling 644016, the IRS accorded non-recognition treatment under IRC Sec. 1035 to the exchange of one annuity contract for two annuity contracts, all issued by the same insurance company. Such Private Letter Rulings are not binding on the IRS for other taxpayers. The Tax Court in Conway vs. Comm., 111T.C. No. 20, (1998) ruled that transfer of a part of the funds invested in one annuity contract to a second annuity qualified as a nontaxable exchange under IRC Sec. 1035. Not all annuity companies allow partial transfers. A single policy may not be exchanged for one on multiple lives, e.g., a second-to-die policy.) Some exceptions for troubled insurers. Rev. Proc. 92-44 and 92-44A

3 In Letter Ruling 644016, the IRS accorded non-recognition treatment under IRC Sec. 1035 to the exchange of one annuity contract for two annuity contracts, all issued by the same insurance company. Such Private Letter Rulings are not binding on the IRS for other taxpayers. The Tax Court in Conway vs. Comm., 111T.C. No. 20, (1998) ruled that transfer of a part of the funds invested in one annuity contract to a second annuity qualified as a nontaxable exchange under IRC Sec. 1035. Not all annuity companies allow partial transfers. A single policy may not be exchanged for one on multiple lives, e.g., a second-to-die policy.) Some exceptions for troubled insurers. Rev. Proc. 92-44 and 92-44A