With two income families, the analysis is just as significant for each spouse, even though one may have higher current earnings.

Determining the best policy starts with an analysis of specific needs. Such needs vary, of course, from family to family, but the following categories normally apply:

• Final lump sum expenses, funeral and debt repayment
• Income for the family until children are self-supporting
• Life income for the surviving spouse
• Special needs, such as education and business situations
• Retirement income needs

Once the needs are identified and measured, the next step is to determine other sources of capital, income or benefits available. The difference between the family’s needs and the money available from other sources represent the amount of life insurance which is needed.

After the amount of the life insurance need has been determined, we can evaluate what type of policy best suits your current financial situation. Your cash flow, other investments and savings patterns will be factors in making this decision.

Permanent life insurance builds cash values that will grow even if the insured is disabled. Term life insurance offers the maximum amount of protection for the lowest initial outlay.

If term insurance is indicated for all or part of the protection, it is very important to consider the conversion options should you wish to change the policy at a later date. Closely examine the scheduled premium increases or benefit reductions as they vary considerably between life insurance companies.

A family’s current and future tax structure should also be considered when evaluating different forms of life insurance. For example, variable universal life has some very attractive tax benefits, but they would be unusable to a retiree who had not been able to substantially fund the policy or who was in a very low income tax bracket.

To a lesser extent, we read of individuals being sued for large amounts of money because of some unusual occurrence such as a water skiing or automobile accident.

Typically, we buy specific insurance to cover us against the more common types of liability. For example, we purchase automobile liability insurance to cover us for the operation of our cars. We buy comprehensive personal liability insurance to cover us for activities arising out of our residence or personal activities. Frequently, the limits on these policies are $100,000 or $300,000.

We tend to feel comfortable behind this shield of protection. However, the diversity of activities that individuals now engage in at times, goes beyond the limits of coverage of those policies. Therefore, the insurance industry has developed an umbrella policy that provides a broader scope of coverage with higher limits of liability than is normally encountered. The purpose of the liability umbrella policy is not to replace the other policies, but to provide excess liability coverage over and above what is referred to as the underlying limits.

The liability umbrella policy has two deductibles. The first deductible constitutes the limits of the underlying auto and personal liability policies. The second is a deductible, usually $250, for any liability exposures beyond the scope of underlying policies.

In acquiring a personal umbrella liability policy, it is very important to choose an adequate limit of liability ($1,000,000 to $5,000,000), and to fully disclose all underlying policies and all liability exposures. Then the policy’s exclusions should be reviewed to make sure they do not delete coverage for an exposure to which you are subject.

Liability insurance is vital to protecting your assets and future earning power.

One way to minimize the costs is by setting up a side business as a “C” corporation. The C corporation can establish a long-term care benefit plan for the owners and chosen employees. Due to the government’s interest in having people covered privately for long-term care needs, the normal rules that prevent discrimination in benefit plans have been waived. This means that the business owner can provide a long-term care benefit for himself and his family (who are either employees or directors of the company), and deduct the entire premium for the long-term care policy without regard to the IRS discrimination rules.

Obtaining a tax deduction on the long-term care premium lowers the cost of having this coverage, thus making the choice of acquiring long-term care insurance that much more attractive.

A recent study by Unum, which provides 75% of group long term policies, found that almost half (46%) of group policy owner claimants in 2007 were under 65.

So, if you are under 65, then one out of every two people in your office will have a long term insurance claim. That is a 1 chance in 2. Yet, people are afraid of dying in a plane crash – the odds of the plane crash death are I in 25 million.

In our above examples keep in mind that one is death (plane crash) and the other can be a living death (long term care needs).

• The study also found the average claim for LTC was for 31 months. Since you will not be working if you are under long term care, do you have money to replace your salary, AND, pay for the care which average $2,000 to $15,000 per month? Remember your disability coverage does not cover this.
• The average age of claimants under 65 was age 53. While 6 % of UNUM group claimants were under 45.
• Two thirds of LTC claims were for care at home.
• The leading claim was for brain and nervous system injuries.

So, I hope you finally see with a 50% chance of needing this coverage and with high costs of coverage it is time to get serious about this coverage.

Contact me if you need ideas or have questions in this area at (713) 871-5919 or email: Darlyn@fgmci.com.

***********************************************

Have you ever considered a “Super Roth 401K plan?” This program allows you to put in unlimited monies tax free, it accumulates tax free; you can withdraw from it tax free and when you die it transfers tax free.

To learn more about it please subscribe (FREE of charge) to our new blog www.WealthyFutureblog.com

Remember, once you subscribe, you will receive an email that you must respond to, otherwise it will not activate your subscription.

After the sudden fall of American International Group (AIG Quote – Cramer on AIG – Stock Picks), policyholders everywhere are asking the same question: How safe is my insurance company?

We all depend on insurance, from health coverage, life insurance, protection for our house and car, to our annuity in retirement. Every facet of our lives involves insurance, and we pay a large amount to make sure we will receive help when we need it.

How can you be sure your insurer is able to meet its claims? If you live in Texas and were affected by Hurricane Ike, aside from the desperate worry over the damage to your property, the news last week about AIG will not have helped.

There are two positive things about insurers. First, they are strictly regulated to ensure companies maintain the ability to meet claims, and this regulation is overseen by state insurance commissioners. Second, in the event an insurer is unable to meet its claims, states have a guaranty arrangement where all insurers would be required to contribute funds. When there is a multi-state life and health-company failure, the National Organization of Life and Health Insurance Guaranty Associations, or NOLHGA, coordinates claims. Similar guaranty associations exist for all insurance types.

So what is different about an insurance company that provides additional comfort? After all, banks are regulated by the FDIC and they fail, and AIG has failed too?

It is important to realize that AIG’s insurance companies are continuing to operate as normal. The insurance companies did not fail; the problems are with the holding company. The insurance companies are considered by the National Association of Insurance Commissioners, or NAIC, to have sufficient liquidity to meet all claims. In fact, the NAIC has set up a special committee of commissioners overseeing AIG to ensure normal operations. Additionally, the NAIC will oversee any sale of an insurance company.

“It will likely be the insurance subsidiaries or their valuable blocks of business and high-quality assets that will be sold in an attempt to return the AIG parent company to a more stable financial position,” NAIC President and Kansas Insurance Commissioner Sandy Praeger said.

The NAIC outlines the regulatory position as operating under conservative accounting rules and mandatory annual CPA audits. Insurers must follow investment regulations and limitations, and there are minimum capital surplus requirements. From a risk perspective, state insurance regulations give insurers the ability to continue to operate normally with greater losses than other parts of the financial sector in down-market cycles. State regulators also perform ongoing financial analysis of insurers and on-site examinations.

According to the NAIC, the entire solvency framework and safety net for policyholders is uniform in every state as evaluated by its Financial Regulation and Accreditation Program. Rating downgrades and drops in share prices do not change an insurer’s ability to pay claims. Ratings issued by TheStreet.com are intended to provide exactly that comfort with the financial-strength rating of the insurance company representing the ability to meet a policyholder’s claim considering various indicators covering capital, reserves, profitability, investments, liquidity and stability.

If an insurance commissioner believes an insurance company is at risk, steps can be taken to protect policyholders. A company can be placed under supervision, a step intended to monitor the company and give it specific targets to meet before the company can continue to operate without oversight. An alternative, in the event of imminent failure, would be to seek a court order to place the company under the control of the commissioner, in which case a manager would normally be appointed to run the company.

There are strict financial guidelines in place to provide policyholders the comfort that insurance companies are acting prudently, state regulators are monitoring the companies to make sure that insurers follow the regulations, and there are actions that a regulator can take to protect the policyholder.

During a disaster like a hurricane, the guaranty funds can kick in if a company fails. NOLHGA President Peter Gallanis said the group has acted in over 60 multi-state insolvencies over the past 25 years, assessing over $4.4 billion on its members to meet policyholder claims. “Current assessments are averaging $25 million per year, a relatively low level considering that we have the capacity for $8 billion,” he said. Policyholders have a preferred status over general creditors, he said.

TheStreet.com Ratings issues financial strength ratings for 4,000 life, health, annuity, and property/casualty insurers. They are available on the Insurers & HMOs Screener. In addition, the Financial Strength Ratings on each of the nation’s 8,600 banks and savings and loans are available at no charge on the Banks & Thrifts Screener.

Gavin Magor
09/23/08 – 10:49 AM EDT

The new survey data shows that:

One in four Baby Boomers erroneously believe that they have coverage for long-term care expenses. According to the National Association of Insurance Commissioners, only about 5.2 million Americans have long-term care insurance – at most about 5 percent of Baby Boomers.

54 percent of Baby Boomers think Medicare will pay for long-term care services. Forty-four percent believe “other health insurance” will pay. Even half of those who say they have long-term care insurance believe Medicare will pay for the care. Medicare does not, in fact, cover long-term care indefinitely. Medicaid will cover these services, but only after requiring individuals to spend down nearly all of their assets to qualify for assistance.

Even among Baby Boomers nearing or at the age of 60 – when concerns about the potential impact of long-term care on retirement savings might be most prominent in their minds – only one in four say they are “very familiar” with long-term care insurance. In addition, 41 percent say they have not had any discussion about long-term care in the past twelve months.

Full survey data can be found here: http://www.ahip.org/content/default.aspx?docid=21352

ANB updated

Losses can come about because of burglaries and vandalism. In addition, losses from fires, floods, tornados, terrorist attacks and tsunamis more than meet the criteria.

Unfortunately, the IRS imposes several convoluted restrictions on the allowable amounts for theft and casualty losses. Moreover it knows that many taxpayers misunderstand the complex rules and overstate their deductions.

IRS examiners learned long ago that most people are unable to substantiate their loss deductions because they neglected to keep adequate records. So, the usual response of the Feds is to throw out or trim unsupported estimates. This is a strict approach that has been sustained by the courts in countless decisions.

The IRS agency offers a free guide, Publication 2194, Disaster Losses Kit for Individuals, available at www.irs.gov or (800) TAX-FORM (829-3676).Publication 2194 includes a handy workbook with schedules for listing clothing, jewelry and a residence’s contents on a room-by-room basis. Schedules for rooms have separates sheets for the entrance hall, living room, dining room, kitchen, bedrooms, garage and other sections.

Alongside each property item are seven columns in which to record details: the number of items; date acquired; cost; loss; decrease in value; and amount deductible as a loss.

Publication 2194’s workbook will help you inventory household goods and personal property. That list can prove indispensable when, for instance, you want to reconsider inadequacy of your insurance coverage, file insurance claims, plan to move – or even create a household inventory for heirs.

Still, creating a list in advance is incomparably easier than trying to remember all those details after property is stolen or destroyed. It is prudent to keep a copy outside the home in a secure location.

Following are highlights of some of the confusing restrictions on who can claim casualty and theft losses and what and how much is allowable.

File claims and account for settlements. The IRS requires itemizers to reduce their losses by insurance settlements or other reimbursements they received or expect to receive. They also may not receive deductions if they fail to file claims.

Subtract $100 per loss. The IRS usually mandates another subtraction of $100 for each loss. But it orders only one $100 reduction when the same event damages several items, say, the same flood damages a person’s home and detached garage or a year-round home and a summer cottage.

Make sure losses exceed 10% of AGI. The big hurdle is that losses are deductible only to the extent that their total exceeds 10% of adjusted gross income. AGI is gross income reduced by specific outlays, such as alimony payments and contributions to retirement plans, and before itemizing or using the standard deduction and claiming dependency exemptions.

Claim losses in the year they are discovered. Casualty and theft losses can be claimed only on the 1040 for the year in which casualties occurred or thefts are discovered.

MORE COMPLEX CASES

Wait, it gets more complicated. The IRS routinely requires you to prove that deductions take into account what missing or damaged items originally cost and what they were worth before and after the incident. In the case of theft, count the value of stolen property as zero.

Do the listing now. In addition, take photos and/or videos to further back up your claim. Remember, the insurance company will demand you “prove” to them that you owned it.

Identity theft is a serious crime. It occurs when your personal information is stolen and used without your knowledge to commit fraud or other crimes. Identity theft can cost you time and money. It can destroy your credit and ruin your good name.

Deter identity thieves by safeguarding your information.

Shred financial documents and paperwork with personal information before you discard them.

Protect your Social Security number. Don’t carry your Social Security card in your wallet or write your Social Security number on a check. Give it out only if absolutely necessary or ask to use another identifier.

Don’t give out personal information on the phone, through the mail, or over the Internet unless you know who you are dealing with.

Never click on links sent in unsolicited emails; instead, type in a web address you know. Use firewalls, anti‐spyware, and anti‐virus software to protect you home computer; keep them up‐to‐date. Visit OnGuardOnline.gov for more information.

Don’t use an obvious password like your birth date, your mother’s maiden name, or the last four digits of your Social Security number.

Keep your personal information in a secure place at home, especially if you have roommates, employ outside help, or are having work done in your house.

Detect suspicious activity by routinely monitoring you financial accounts and billing statements.

Be alert to signs that require immediate attention:

Bills that do not arrive as expected

Unexpected credit cards or accounts statements

Denials of credit for no apparent reason

Calls or letters about purchases you did not make

Inspect:

Your credit report. Credit reports contain information about you, including what accounts you have and your bill paying history.

The law requires the major nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to give you a free copy of your credit report each year if you ask for it.

Visit www.AnnualCreiditReport.com or call 1‐877‐322‐8228, a service created by these three companies, to order your free credit reports each year. You also can write: Annual Credit Reports Request Service, P.O. Box 105281, Atlanta, GA 30348‐5281.

Your financial statements. Review financial accounts and billing statements regularly, looking for charges you did not make.

Defend against ID theft as soon as you suspect it.

Place a “Fraud Alert” on your credit reports, and review the reports carefully. The alert tells creditors to follow certain procedures before they open new accounts in your name or make changes to you existing accounts. The three nationwide consumer reporting companies have toll‐free numbers for placing an initial 90‐day fraud alert; a call to one company is sufficient:

Equifax: 1‐800‐525‐6285

Experian: 1‐888‐EXPERIAN (397‐3742)

TransUnion: 1‐800‐680‐7289

Placing a fraud alert entitles you to free copies of your credit reports. Look for inquires from companies you haven’t contacted, accounts you didn’t open, and debts on your accounts that you can’t explain.

Close accounts. Close any accounts that have been tampered with or established fraudulently.

Call the security or fraud departments of each company where an account was opened or changed without your okay. Follow up in writing, with copies of supporting documents.

Use the ID Theft Affidavit at ftc.gov/idtheft to support your written statement.

Ask for verification that the disputed account has been closed and the fraudulent debts discharged.

Keep copies of documents and records of your conversation about the theft.

File a police report. File a report with law enforcement officials to help you with creditors who may want proof of the crime.

Report the theft to the Federal Trade Commission. Your report helps law enforcement officials across the country in their investigation.

Online: ftc.gov/idtheft

By phone: 1‐877‐ID‐THEFT (438‐4338) or TTY, 1‐866‐653‐4261

By mail: Identity Theft Clearinghouse, Federal Trade Commission, 600 Pennsylvania Ave., NW Washington, DC 20580

COMMON WAYS ID THEFT HAPPENS:

Skilled identity thieves use a variety of methods to steal your personal information, including:

Dumpster Diving. They rummage through trash looking for bills or other paper with your personal information on it.

Skimming. They steal credit/debit card numbers by using a special storage device when processing your card.
Phishing. They pretend to be financial institutions or companies and send spam or pop-up messages to get you to reveal your personal information.

Changing Your Address. They divert your billing statements to another location by completing a “change of address” form.

“Old Fashioned” Stealing. They steal wallets and purses; mail, including bank and credit card statements; per-approved credit offers; and new checks or tax information. They steal personnel records from their employers, or bribe employees who have access.

If your community has you place your trash for pick up on the curbside….do not place it at night. Thieves travel up your street going through your trash bags. Wake up 2 minutes earlier in the morning and put it on the curb before going to work.

Ah yes discipline or regret!