Here we will give an overview of what specialty insurance is and what lines you carry. In the sections below we will touch on your main personal lines.
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
Replace income for dependents. If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death
Pay final expenses. Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
Create an inheritance for your heirs. Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
Pay federal “death” taxes and state “death” taxes. Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal “death” tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level “death” taxes.
Make significant charitable contributions. By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy’s premiums.
Create a source of savings. Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).
Disability Insurance, often called DI or disability income insurance, or income protection, is a form of insurance that insures the beneficiary’s earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work. For example, the worker may suffer from an inability to maintain composure in the case of psychological disorders or an injury, illness or condition that causes physical impairment or incapacity to work. It encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD). Statistics show that in the US a disabling accident occurs, on average, once every second. In fact, nearly 18.5% of Americans are currently living with a disability, and 1 out of every 4 persons in the US workforce will suffer a disabling injury before retirement.
Annuities generally fall into two categories: deferred and income. Each works differently and offers unique advantages.
Deferred annuities can be a good way to boost your retirement savings once you’ve made the maximum allowable contributions to your 401(k) or IRA.1 Like any tax-deferred investment, earnings compound over time, providing growth opportunities that taxable accounts lack.
Deferred annuities have no IRS contribution limits,2 so you can invest as much as you want for retirement. You can also use your savings to create a guaranteed3 stream of income for retirement. Depending on how annuities are funded, they may not have minimum required distributions (MRDs).
Bear in mind that withdrawals of taxable amounts from an annuity are subject to ordinary income tax, and, if taken before age 59½, may be subject to a 10% IRS penalty. Annuities also come with annual charges not found in mutual funds, which will affect your returns.
Income annuities may be appropriate for investors in or near retirement because they offer guaranteed3 income for life or a set period of time. They may allow you to be more aggressive with other investments in your portfolio, since they provide a lifetime income stream.
Keep in mind that you may have limited or no access to the assets used to purchase income annuities.
Long Term Care
Many people believe that the medical insurance they currently have will pay for all or much of their long-term care. In general, health insurance covers only very limited and specific types of long-term care, and disability policies don’t cover any at all.
Most forms of insurance, such as the private health insurance or HMO you may have on your own or through your employer, follow the same general rules as Medicare with regard to paying for long-term care services. If they do cover long-term care services, it is typically only for skilled, short-term, medically necessary care.