Archive for Insurance

How To Use Life Insurance In Your Retirement Planning – Article Recommended by Paul Ferraresi

Investing in the market without taking losses — is it too good to be true? Not according to the University of Michigan’s head coach Jim Harbaugh. In August, University of Michigan helped Harbaugh become the top-paid college football coach in the nation, according to USA Today figures, by creating a deferred compensation package utilizing cash value life insurance called Indexed Universal Life Insurance (IUL).
Just like in Harbaugh’s case, IULs appeal to many executives and business owners because of the advantages they provide. IULs allow cash value within the policy to grow tax-free over time. IULs are funded with post-tax dollars which allow clients to withdraw money tax-free at any age, and provide financial security in the form of a death benefit for the family after the client passes.
One of the main advantages of IULs is that the cash value is protected from drops in the market. An IUL is a cash value policy that has both a death benefit and a savings portion. In an IUL the investments are not placed directly in the market where they would be subject to a loss. Rather, they are put into a strategy that mirrors an index such as the S&P 500, which allows the participant to realize all or most of the gains in the market. These gains are then locked in to protect against potential losses.
In addition, when compared to an IRA or a 401(k), IULs provide more flexibility. Unlike IRAs and 401(k)s, there is no limit on how much money can be added annually, as long as the added cash does not create a Modified Endowment Contract (MEC), which is taxable. An MEC is where the funding has exceeded the IRS limitations known as the “7-pay test,” which limits the amount of excess cash that can be put into a policy in any seven-year period before it loses its tax advantages. IULs allow for a high cash value at the beginning of the policy. There are no restrictions on when the money can be taken out, unlike an IRA. Also, the money inside an IUL can be taken out at any age by the client tax-free and without extra fees.

An IUL is beneficial to those who are looking to invest their extra money tax deferred after they have fully utilized their other retirement accounts, such as a 401(k). IULs are also beneficial to those who clients who do not qualify for a Roth IRA. IULs provide an opportunity for individuals to allocate premiums to flexible and accessible tax-deferred accounts. For younger clients, savings can be rolled over from a previous retirement plan. IULs can also help people who started retirement planning later, due to the fact that an IUL can be over-funded, unlike a 401(k) or IRA, which have strict contribution limits.
Along with tax-free wealth building, IULs provide a source of financial security to the family in the event of death or disability. In an event of the death of the policyholder, the death benefit is received tax-free by the beneficiary of the policy in a lump sum. Some policies can be constructed to include living benefits in the event of disability or chronic illness. In this way, IULs provide a way in which individuals can grow and protect their income, as well as provide extra funds for retirement.
In the case of coach Harbaugh, an IUL was used to save millions in tax-free retirement. This was possible due to the growth of the cash value inside of the policy that increased his retirement funds, which are accessible tax-free at the age of 70. Upon being hired at Michigan, Harbaugh entered a split-dollar loan agreement, in which the premium, cash value and death benefit is split between two parties. This split-dollar agreement was funded by cash value life insurance policy or IUL.

Under this split-dollar agreement, the University of Michigan agreed to pay seven $2 million loan advances into a life insurance policy. By implementing this policy, Harbaugh does not have to pay back the loan taken on the policy until his death, and his beneficiaries will receive the remainder of the death benefit. While he is alive, Harbaugh is able to borrow money out of the policy tax-free. Through this plan, it is projected that Harbaugh could begin taking $1.4 million per year out of the policy tax-free, beginning at the age of 66.
IULs are a popular choice amongst clients who would like the gains of the markets without the losses, as well as protection for their family after death. This makes IULs a comprehensive and flexible wealth building option.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms.

Jacob Alphin, Author, (May 11, 2017). How to Use Life Insurance in Your Retirement Planning. Forbes. Retrieved from https://www.forbes.com/sites/forbesfinancecouncil/2017/05/11/how-to-use-life-insurance-in-your-retirement-planning/2/#16adc1593b1b

Treasuring Treasure by Paul Ferraresi

Check to make sure those valuables are covered by insurance.

Is your jewelry under protected? In cases of theft or damage, most homeowner policies cover only up to $1,500.

Get an appraisal, and buy a separate jewelry policy or rider.

Cost: about $10 to $25 per $1,000 of coverage each year.

Insurance You Should Have by Paul Ferraresi

Most people try to buy the least amount of insurance in all areas hoping to save on premiums. But penny wise may be pound foolish…

Here is a short article written by Russell Hall. I suggest you share this with friends and family.

Most discussions of insurance and estate planning focus on the value of life insurance to your heirs. Not this one. Instead, let’s consider insurance to protect your income and assets now, and to shield your executor later.

What happens if you’re in a car accident with serious injuries or death – and it’s your fault? Expect to be sued, and to pay a large judgment. Every driver is at risk of losing bank accounts, stocks, bonds, mutual funds, rental property, and other non-exempt assets to a lawsuit.

In Texas, you may keep your homestead, pension, retirement accounts, annuities, and life insurance. However, cash distributions are not exempt, and may go to the alert creditor. You may have substantial non-exempt assets, but what good are they if you cannot spend them?

As a rule of thumb, carry liability insurance equal to your non-exempt assets plus five to ten years of income. Suppose you have a home, an IRA, a modest checking account, and $300,000 in CDs. The home and IRA are exempt from creditors’ claims. The CDs are not. That suggests at least $300,000 in liability insurance. If Social Security and IRA income total $50,000 a year, another $250,000 to $500,000 in liability insurance is indicated. Even someone of modest means may want $500,000 to $1 million in liability insurance.

The typical automobile or homeowners’ policy offers no more than $500,000 in coverage. However, our agent can often provide an inexpensive umbrella policy from the same carrier with limits of $1 to $5 million, which is more than enough for most people.

Suppose you stop driving, pay off the mortgage, and die, judgment-free, without any liability insurance. Who cares at that point? Your executor should. An executor is a fiduciary with the most dangerous, thankless task known to law. They must collect all your assets, pay all your debts, distribute the remainder to your beneficiaries and make no mistakes. As one summarized it, “Whatever happens, it’s the executor’s fault.”

Both liability and property insurance will go a long way to protect the executor, and, ultimately, your heirs. New executors should review the estate with an insurance agent. Existing policies may be adequate. If not, the executor may obtain insurance at the estate’s expense. Better though, that you yourself review your insurance, and develop a plan to protect yourself in retirement. Doing so minimizes everyone’s risk, and leaves one less task to be done when you’re gone.

How to Enroll in – and Pay for – Medicare by Paul Ferraresi

You must enroll in Medicare at age 65, unless you are covered by a health plan from an employer or your spouse’s employer. If you don’t enroll on a timely basis, you will have to pay late enrollment penalties.

For Part A, that penalty is a 10% increase in the monthly premium, which must be paid for twice the number of years you were eligible but not enrolled. The penalty for late enrollment in Part B is 10% for each 12 month period that you were eligible but not enrolled and the penalty must be paid for the ENTIRE time you have Part B coverage.

If you are receiving Social Security benefits when you turn 65, you will automatically be enrolled in Parts A and B. Retirees who aren’t automatically enrolled can do so as early as one to three months before the month you turn 65. Part B coverage will start as soon as you hit 65. If you wait until the month you turn 65 to enroll in Part B, or the three months after your birthday, there will be a delay before Part B coverage takes effect.

ABCD’s OF MEDICARE ENROLLMENT

Part A covers hospital insurance; Part B covers medical insurance; Part C, also called a Medicare Advantage plan, combines Parts A, B and sometimes D; and Part D covers prescriptions.

Retirees can sign up for Parts A and B, and then decide if they need Part D. They may also decide if they need a supplemental “Medigap” policy since Medicare only covers a maximum of 80% of approved charges.

Alternatively, retirees can sign up for the Medicare Advantage plan. Medigap policies aren’t available to Medicare Advantage plan beneficiaries.

Retirees who want Part D coverage must sign up during their initial enrollment period or face late-enrollment penalties, unless you have comparable coverage through another plan. You can switch to Part D any time before that comparable coverage ends; after it does, retirees have 63 days to enroll in Part D. If you miss the initial enrollment period, you can sign up during the general enrollment period between January 1 and March 31, but coverage won’t begin until July 1.

MEDICARE COSTS

The average out of pocket cost paid in 2016 was in excess of $5,000. Most people won’t pay Part A premiums if you or your spouse paid into Social Security for at least 10 years (40 quarters). If you paid into the system for between 30 and 39 quarters, the premium in 2017 is $224 a month, and increases to $411 per month for those who paid into the system for fewer than 30 quarters.

The base premium for Part B in 2017 is $134 per month. The more income you make, the higher premium you pay for Part B. For example, joint filers with a modified adjusted gross income between $170,000 and $214,000 will pay an additional $42 per month.

Part A deductibles are $1,317 in 2017 per benefit period or “spell of illness”. A patient is eligible for 90 days of hospital care and 100 days of extended care in the same benefit period.

However, coinsurance kicks in after 60 days and patients will have to pay $329 per day during the benefit period in 2017. After 90 days, when patients begin drawing on their lifetime reserve, coinsurance increases to $658 per day in 2017.

The deductible for Part B is $183 per year in 2017.

Part D coverage introduces the so called “donut hole”, the gap in coverage when costs exceed the combined annual deductible of $400 in 2017 and the initial coverage period of $3,700 in 2017. During that initial coverage period, patients are responsible for 25% of their prescription costs, but once they meet the donut hole limit, Part D benefits stop. Patients will take on 40% of the cost of covered brand name drugs and 58% of the cost of covered generics.

The maximum out of pocket cost for prescription drugs in 2017 is $4,950. Once that limit is exceeded, catastrophic coverage kicks in. Part D will pay 95% of covered drugs, or the cost of the drug minus the co-pay. Patients will be responsible for either 5% of the cost, or co-pays of $11.20 for generic drugs and $7.20 for brand name drugs, whichever is greater.

LONG-TERM CARE

Long-term care is not covered by Medicare or Medigap.

Medicaid, however, does cover some LTC services, although programs and eligibility vary by state.

Review Your Homeowner’s Policy

Proximity to a firehouse is just one variable in determining the cost of insurance coverage that protects your home in the event of a fire, theft, accident or natural disaster.

In a survey of 1,001 consumers in April, the Travelers Co. found that just over half of the respondents (56%) in 2016 said they check their homeowner’s policies at least once a year.

One easy way to save on your premiums is by bundling insurance policies. Consumers could save an average of $314 per year by combining their auto and home, condominium or renters policies with the same insurer.

Combining other types of insurance products, such as life insurance or an umbrella policy, may qualify for a bundling discount as well. The more insurance you stack on, or give to one insurance company, the more likely they are to give you discounts.

Home improvements including the roof, windows, electrical or plumbing systems may also qualify for a premium discount.

Installing a security system, particularly one that automatically dials the police or fire department can qualify for a 5% to 10% premium discount as well.

Discounts might be available for homes with features that mitigate against wind damage, such as hurricane shutters, impact resistant windows and doors or roof straps.

There are plenty of other lesser known discounts that might be available, depending on the insurance company, from being a non smoker to owning a home built with “green” features like Energy Star appliances or sustainable materials like bamboo.

There are two other ways to reduce your homeowner’s insurance premium, although they don’t technically qualify as discounts. The first is to raise your deductible. The second is to maintain good credit. Customers with poor credit could pay twice as much for insurance as those with excellent credit.

“Failure is a detour,
not a dead-end street.”

-Zig Ziglar