Ensuring you’re financially prepared for the future includes planning for unexpected situations. As part of our financial planning process, our advisors help identify gaps in your insurance coverage, and, as appropriate, we will recommend policies to manage future risks and help protect your family from financial hardships.
Many different types of insurance are available to help clients prepare for the unknown, and we will gladly work with you to determine which one(s) is best for your situation. Here is some information about the most common types of insurance we offer.
Long-Term Care Insurance
One of the best ways to prepare for care later in life is to purchase long-term care insurance. It’s estimated that 70% of people will need long-term care at some point in their lives1, and having this insurance helps alleviate the financial strain and care burden from family members.
Traditional long-term care insurance provides you a stated daily or monthly benefit should you have severe cognitive impairment or be unable to perform at least two of six daily living activities. Long-term care policies are usually reimbursement-based, meaning they will reimburse you for actual costs paid. With the average cost of a private room in a nursing home being more than $150,000 in Minnesota2, you can protect your finances by having a plan for the cost of care.
Life Insurance
In our experience, clients often assume employer-provided life insurance is sufficient, and they end up not securing additional life insurance coverage at the optimal time. At the same time, many overlook insuring a spouse who doesn’t work outside the home, or some clients have too much or too little coverage. Here are the primary forms of life insurance:
- Whole Life Insurance
In exchange for fixed premiums, an insurance company promises to pay a set benefit when the policyholder dies but also offers additional benefits. Whole life insurance policies can build up cash value—effectively a cash reserve that pays a modest rate of return, and the growth is tax-deferred. Guarantees are based on the issuing company's claims-paying ability.
- Term Life Insurance
Term insurance provides temporary life insurance protection on a limited budget. When policyholders buy term insurance, they purchase coverage for a specific period and pay a specific price.
If the policyholder dies during that time, the policy's beneficiaries receive the benefit. If they outlive the policy, it is no longer in effect. The person would have to reapply to receive any further benefit.
- Life Insurance Retirement Plan
A life insurance retirement plan (LIRP) is a permanent life insurance policy that uses the cash value component to help fund retirement. Current tax laws allow policyholders to overfund a policy, paying more than the premium. This strategy can result in tax advantages, including pulling the cash value out tax-free.
Annuities
An annuity is a contract between you and an insurance company in which the company promises to make periodic payments to you, starting immediately or at some future time. You buy an annuity either with a single payment or a series of payments called premiums. Some annuity contracts provide a way to save for retirement. Others can turn your savings into a stream of retirement income. Others do both!
Disability Income Insurance
Lastly, disability insurance provides a way to help ensure you and your family will have an income if you become ill or injured and cannot work. According to the Social Security Administration, one in four of today’s 20-year-olds can expect to be out of work for at least a year before they reach the average retirement age because of a disabling condition, such as pregnancy, injuries, and mental health needs. The benefits are provided to you (the insured) tax-free when paid for with after-tax dollars.
If you are a business owner, disability insurance can also be structured to provide the necessary business income to continue operations and payroll should you become disabled and unable to work. However, it does not provide you with a salary. You would need your personal disability policy to complement the one structured for the business expenses.
Every individual’s situation is different, so the best course of action is to meet with your financial advisor to determine which type(s) of insurance is best for you and your family. We’d be happy to walk you through your options. Contact us today to schedule an appointment.
1U.S. Department of Health and Human Services
2RetireGuide.com, 2023