I’d like to introduce you to a new number that’s getting a lot of attention these days. It’s called your PDQ, or Personal Disability Quotient. And it represents your chance of having an illness or injury that could force you to miss work for an extended period of time.
It's an important number for you to know because so much depends on your ability to earn an income, from paying your mortgage to saving for retirement and your children’s education.
As your financial advisor, I recommend finding out your PDQ. It only takes a minute, and it can really help you get a better grasp of how much is at stake should you ever face a disability or extended illness. You can calculate your PDQ at http://www.whatsmypdq.org.
Katherine Wichmann Zacharias
www.kswz.biz
Follow me on www.twitter.com/TheWic
Tuesday, March 31, 2009
Monday, March 30, 2009
Universal Life Definition
Life Insurance which combines the low-cost protection of term insurance with a savings component that is invested in a tax-deferred account, the cash value of which may be available for a loan to the policyholder. Universal life was created to provide more flexibility than whole life by allowing the holder to shift money between the insurance and savings components of the policy. Additionally, the inner workings of the investment process are openly displayed to the holder, whereas details of whole life investments tend to be quite scarce. Premiums, which are variable, are broken down by the insurance company into insurance and savings. Therefore, the holder can adjust the proportions of the policy based on external conditions. If the savings are earning a poor return, they can be used to pay the premiums instead of injecting more money. If the holder remains insurable, more of the premium can be applied to insurance, increasing the death benefit. Unlike with whole life, the cash value investments grow at a variable rate that is adjusted monthly. There is usually a minimum rate of return. These changes to the interest scheme allow the holder to take advantage of rising interest rates. The danger is that falling interest rates may cause premiums to increase and even cause the policy to lapse if interest can no longer pay a portion of the insurance costs.
Tuesday, March 17, 2009
Three Things Everyone Should Know About Life Insurance
As any financial advisor worth his or her salt will tell you, if you have loved ones who depend on your income, a life insurance policy is a must-have. If you were to die, an effective life insurance plan will ensure that all your family’s financial needs will be covered—from the monthly mortgage and utility bills to your child’s college education. Without life insurance, your family could find themselves in dire straits if something happened to you.
Unfortunately, this advice often falls on deaf ears. In 2008, 68 million Americans still did not have any life insurance, according to the Life and Health Insurance Foundation for Education. On top of that, most people who do have life insurance don’t have enough coverage to fully support their family.
If you do not own any life insurance or have minimal coverage, here are three things you might want to consider:
1. Everyone needs life insurance.
Many people mistakenly assume they have no need for life insurance because their children are grown and no longer require financial support. What these people don’t realize is that life insurance coverage can be used for much more than supporting their loved ones.
For example, the payout from your life insurance policy could be used to cover your final expenses, including medical bills, estate taxes and funeral expenses. Without life insurance coverage, your family will be expected to foot these bills. Considering that the average funeral costs $10,000 or more, do you want to leave this heavy financial burden on your loved ones’ shoulders?
You can also designate life insurance proceeds to help fund a grandchild’s college education or even donate them to your favorite charitable organization.
2. Three times your income may not be enough.
Some people say the best way to determine the amount of life insurance coverage you need is to simply multiply your annual income by three. However, this amount may not be enough. What if your spouse who is unable to work lives many more years after you die? Three years worth of income will not be nearly enough to support your spouse for another eight, ten or even 20 years.
This is why many professionals say the “three times your income” method is not always a good rule of thumb. Because each family faces a unique set of circumstances and needs, you should consider factors other than annual income. Figuring out the right amount life insurance requires a comprehensive evaluation of your financial goals, debts, investments, lifestyle and habits.
3. You’re never too old to buy life insurance.
Many seniors believe they are too old to worry about life insurance because they no longer have loved ones relying on their income. But once again, a life insurance policy can help cover your final expenses after you die so your family is not left with the bill.
Before you discount life insurance, it’s important to know all the facts. These valuable insurance policies can protect your family’s financial well-being, pay off your final expenses and even fund a loved one’s home purchase or college education.
Of course, whether or not you qualify and how much you will pay for life insurance depends on your age, health and the type of insurance you want to purchase. If you are considering buying life insurance, you may want to meet with a financial advisor or insurance agent, who can help you determine how much and what kind of life insurance you need.
One thing is certain: everyone should consider purchasing life insurance. After all, your family’s happiness could depend on it.
Unfortunately, this advice often falls on deaf ears. In 2008, 68 million Americans still did not have any life insurance, according to the Life and Health Insurance Foundation for Education. On top of that, most people who do have life insurance don’t have enough coverage to fully support their family.
If you do not own any life insurance or have minimal coverage, here are three things you might want to consider:
1. Everyone needs life insurance.
Many people mistakenly assume they have no need for life insurance because their children are grown and no longer require financial support. What these people don’t realize is that life insurance coverage can be used for much more than supporting their loved ones.
For example, the payout from your life insurance policy could be used to cover your final expenses, including medical bills, estate taxes and funeral expenses. Without life insurance coverage, your family will be expected to foot these bills. Considering that the average funeral costs $10,000 or more, do you want to leave this heavy financial burden on your loved ones’ shoulders?
You can also designate life insurance proceeds to help fund a grandchild’s college education or even donate them to your favorite charitable organization.
2. Three times your income may not be enough.
Some people say the best way to determine the amount of life insurance coverage you need is to simply multiply your annual income by three. However, this amount may not be enough. What if your spouse who is unable to work lives many more years after you die? Three years worth of income will not be nearly enough to support your spouse for another eight, ten or even 20 years.
This is why many professionals say the “three times your income” method is not always a good rule of thumb. Because each family faces a unique set of circumstances and needs, you should consider factors other than annual income. Figuring out the right amount life insurance requires a comprehensive evaluation of your financial goals, debts, investments, lifestyle and habits.
3. You’re never too old to buy life insurance.
Many seniors believe they are too old to worry about life insurance because they no longer have loved ones relying on their income. But once again, a life insurance policy can help cover your final expenses after you die so your family is not left with the bill.
Before you discount life insurance, it’s important to know all the facts. These valuable insurance policies can protect your family’s financial well-being, pay off your final expenses and even fund a loved one’s home purchase or college education.
Of course, whether or not you qualify and how much you will pay for life insurance depends on your age, health and the type of insurance you want to purchase. If you are considering buying life insurance, you may want to meet with a financial advisor or insurance agent, who can help you determine how much and what kind of life insurance you need.
One thing is certain: everyone should consider purchasing life insurance. After all, your family’s happiness could depend on it.
Friday, March 13, 2009
Return of Premium Term Life Policies Worth Exploring
To the relief of many consumers, not really satisfied with either of the two types of traditional life insurance, insurance companies have started offering a third option. Called Return of Premium (ROP) Term, this new product combines features of term insurance and permanent insurance. The feature that gets buyers really excited about ROP Term is that at the end of the policy's term, if you're still alive, you get all your premiums back! That's right. Every cent you paid for the policy will be returned to you.
For many people, deciding between the two types of traditional life insurance has been an agonizing choice: Term or Permanent Cash Value? Term or Permanent Cash Value? The question can go round and round in one's head like the hamster on the proverbial exercise wheel.
The premiums are less for Term, but there's no return on the investment unless you die during the 10 or 20 or 30 years that is the policy's term and your survivors collect the death benefit. With today's long life expectancies, it's likely that you probably won't die before the policy expires. You want to protect your dependents, but you may hate the thought of all those premiums paid and nothing to show for them if you live, which is what you reasonably expect to do.
On the other hand, you can build cash value with the savings component of a Permanent Cash Value policy -- whether whole, universal, or variable. Plus the guaranteed renewable feature is attractive, since you don't know what your health may be years from now. But Permanent Cash Value insurance typically costs two or three times as much in premiums compared to premiums for the same death benefit with Term. Should you spend that much more on life insurance for the cash value and permanent features? Can you afford to spend that much more? It's a hard call for many.
What a relief to have this third choice of ROP Term, an elegant solution that splits the problem up the middle. It's like Term Life Insurance in that the policy is effective, as long as you pay your premiums, for a specified period of time, usually up to 30 years. But it adds a cash value feature with the guarantee from the insurer: If you pay your premiums and you live, we'll give you your money back.
On a typical 20-year Level Term Life Insurance policy the ROP feature could cost from 25 to 50 percent more a year than a standard Term policy of the same period. The additional premium, which the insurer invests, provides the cash for the returned premiums. It's like buying traditional term and investing an extra sum that will grow at a steady pace without risk. It's not "free" insurance, but to the majority of people who -- if they buy the coverage while still relatively young and consequently will most likely still be still living at the end of the policy's term -- it sure feels like it is.
The biggest determinant of the extra charge for a Return of Premium feature is the length of time until you get the premiums back. A 30-year policy is less costly than a shorter one because there is more time for the additional funds to grow. A 35-year-old male in good health might pay $970 annually for a 30-year, $500,000 Return of Premium policy. That's $295, or 44 percent, more than regular term from the same insurer. A 20-year policy might cost $1,175, or more than three times the cost of regular term. A 15-year policy, at $1,645, is almost six times the cost of traditional term.
Is the investment component of the ROP Term policy a good investment? By counting the extra premiums paid as the amount invested and the overall premiums paid back as the investment payoff, these policies pay annual returns of 2.5 to 9 percent--the longer the policy's life and the smaller the extra premium, the better the return. And for many people, there's an additional return in tax savings. If you invested the extra premium yourself, the net gain could be taxable. Putting that amount into an insurance policy makes the total payback a refund of the premiums you paid, and thus not taxable.
You reap the big benefits from ROP Term if you keep the policy for the full term. However, you can surrender the policy during the term and get back a portion of the premium. Premiums are returned on a sliding scale that builds up to 100 percent at the end of the term. So if you take out a 20-year policy and cancel at year 15, you can expect to get back about 50 percent of your money. It's unlikely you'll get any return of premium if you surrender the policy within the first five years. That's because insurers only start making a profit on your policy if you stick around more than five years.
What if you bought a car, made the car payments, and then, when you'd finished paying for the car, you got all your car payments back? Who doesn't think that's a pretty swell idea? The new ROP Term Policy takes features from both Term and Permanent Life Insurance and rolls them into one very attractive alternative - just like getting all your car payments back when you finish paying for the car.
For many people, deciding between the two types of traditional life insurance has been an agonizing choice: Term or Permanent Cash Value? Term or Permanent Cash Value? The question can go round and round in one's head like the hamster on the proverbial exercise wheel.
The premiums are less for Term, but there's no return on the investment unless you die during the 10 or 20 or 30 years that is the policy's term and your survivors collect the death benefit. With today's long life expectancies, it's likely that you probably won't die before the policy expires. You want to protect your dependents, but you may hate the thought of all those premiums paid and nothing to show for them if you live, which is what you reasonably expect to do.
On the other hand, you can build cash value with the savings component of a Permanent Cash Value policy -- whether whole, universal, or variable. Plus the guaranteed renewable feature is attractive, since you don't know what your health may be years from now. But Permanent Cash Value insurance typically costs two or three times as much in premiums compared to premiums for the same death benefit with Term. Should you spend that much more on life insurance for the cash value and permanent features? Can you afford to spend that much more? It's a hard call for many.
What a relief to have this third choice of ROP Term, an elegant solution that splits the problem up the middle. It's like Term Life Insurance in that the policy is effective, as long as you pay your premiums, for a specified period of time, usually up to 30 years. But it adds a cash value feature with the guarantee from the insurer: If you pay your premiums and you live, we'll give you your money back.
On a typical 20-year Level Term Life Insurance policy the ROP feature could cost from 25 to 50 percent more a year than a standard Term policy of the same period. The additional premium, which the insurer invests, provides the cash for the returned premiums. It's like buying traditional term and investing an extra sum that will grow at a steady pace without risk. It's not "free" insurance, but to the majority of people who -- if they buy the coverage while still relatively young and consequently will most likely still be still living at the end of the policy's term -- it sure feels like it is.
The biggest determinant of the extra charge for a Return of Premium feature is the length of time until you get the premiums back. A 30-year policy is less costly than a shorter one because there is more time for the additional funds to grow. A 35-year-old male in good health might pay $970 annually for a 30-year, $500,000 Return of Premium policy. That's $295, or 44 percent, more than regular term from the same insurer. A 20-year policy might cost $1,175, or more than three times the cost of regular term. A 15-year policy, at $1,645, is almost six times the cost of traditional term.
Is the investment component of the ROP Term policy a good investment? By counting the extra premiums paid as the amount invested and the overall premiums paid back as the investment payoff, these policies pay annual returns of 2.5 to 9 percent--the longer the policy's life and the smaller the extra premium, the better the return. And for many people, there's an additional return in tax savings. If you invested the extra premium yourself, the net gain could be taxable. Putting that amount into an insurance policy makes the total payback a refund of the premiums you paid, and thus not taxable.
You reap the big benefits from ROP Term if you keep the policy for the full term. However, you can surrender the policy during the term and get back a portion of the premium. Premiums are returned on a sliding scale that builds up to 100 percent at the end of the term. So if you take out a 20-year policy and cancel at year 15, you can expect to get back about 50 percent of your money. It's unlikely you'll get any return of premium if you surrender the policy within the first five years. That's because insurers only start making a profit on your policy if you stick around more than five years.
What if you bought a car, made the car payments, and then, when you'd finished paying for the car, you got all your car payments back? Who doesn't think that's a pretty swell idea? The new ROP Term Policy takes features from both Term and Permanent Life Insurance and rolls them into one very attractive alternative - just like getting all your car payments back when you finish paying for the car.
Wednesday, March 11, 2009
Life Insurance As An Asset
Life Insurance as an Asset
Life Insurance is a very important and effective part of your overall financial plan. It allows you to leverage your assets and provides the opportunity to transfer wealth to your beneficiaries "while reducing your concerns as to the performance of your other assets."
The current market conditions provide an excellent opportunity to buy life insurance. Many of you have suffered losses in the recent market fluctuations. It will take years for you to recoup what you have lost. Therefore, why not "insure" those losses? We can do this using Life Insurance. Regardless, I can give you a way to make it through this temporary drop and not affect what you had hoped to have for the benefit of your families.
Allow me to illustrate how Life Insurance can be used as an asset and protector. I provide a spreadsheet for each of you showing what can be done on your behalf. You need an advisor who can help you feel more comfortable about your current financial situation. I can be that advisor!
To get more info. or a customized spreadsheet, call or email today!!
Life Insurance is a very important and effective part of your overall financial plan. It allows you to leverage your assets and provides the opportunity to transfer wealth to your beneficiaries "while reducing your concerns as to the performance of your other assets."
The current market conditions provide an excellent opportunity to buy life insurance. Many of you have suffered losses in the recent market fluctuations. It will take years for you to recoup what you have lost. Therefore, why not "insure" those losses? We can do this using Life Insurance. Regardless, I can give you a way to make it through this temporary drop and not affect what you had hoped to have for the benefit of your families.
Allow me to illustrate how Life Insurance can be used as an asset and protector. I provide a spreadsheet for each of you showing what can be done on your behalf. You need an advisor who can help you feel more comfortable about your current financial situation. I can be that advisor!
To get more info. or a customized spreadsheet, call or email today!!
Wednesday, March 4, 2009
These tough times in the market....
Hello all. I have been assisting a lot of people lately who lost money in the market. Permanent Life insurance, not term, and fixed annuities are the only tax favored financial vehicles out there that didn't lose money in the last few years and won't in the future. They are the only ones with lifetime guarantees right now as well. If you hear of someone in that situation please let me know. I would be happy to give them so free info. I don't know if you know too, I offer my clients, friends, as well as any referrals, free annual financial reviews. Thank you all for your support. Have a nice day.
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