Life and Health

What if your insurance company kicks the bucket before you do?

The odds of this occurring are very slim.

During the past four decades, only 426 Life and Health carriers have failed (an average of 10 a year). Despite the recession, only eight insurers went under between 2008 and 2012.

Since the Great Depression, policyholders of bankrupt insurance companies have recovered an average of 95 cents on the dollar.

Under federal bankruptcy law, failing Life and Health insurers go into a tightly regulated three-tiered resolution program run by their home state’s guaranty association (GA). This guaranty association is an insolvency “safety net” financed by insurance companies that operates in much the same way that the FDIC guarantees banking accounts. (Separate GAs also protect Homeowners and Auto insurance customers.)

What’s more, because Life benefits are not payable upon demand in the same way as bank deposits, policyholders don’t have to worry about a “run” on their insurance company.

Individual Life policies are usually guaranteed up to $300,000 (cash values to $100,000) and annuities up to $250,000, although the amounts vary.

If your Life insurance company does go under, we offer these recommendations:

• Keep paying your premiums to avoid the risk of terminating coverage or (for Whole Life) reducing its cash value.
• Don’t surrender a Whole Life policy for quick cash at the cost of giving up its full value to your beneficiary(ies).
• Ask us for help in requesting a “hardship disbursement” from the insurance company (we have detailed information on your policy and can help you draft a letter that should help you get a positive and prompt response.
• As always, our agency stands ready to serve you.

More and more senior citizens and those nearing retirement are buying Life insurance these days. Many of these people are worried that their spouse will run out of money if they die; while others hope to make up for losses suffered in the stock market decline.

An increasing number of Life insurers require testing the cognitive abilities of older applicants, in addition to taking a physical exam. Some companies make it standard practice to test applicants 60 years or older, while others begin testing at age 70 or 80.

The reason: cognitive impairment has a high correlation with early mortality. A study by the Alzheimer’s Association found than 60% of people with Alzheimer’s at age 70 will probably die before they turn 80, compared to 30% of those who don’t have the disease. Alzheimer’s is the sixth-leading cause of death in the U.S., with fatalities soaring by 66% between 2000 and 2008 – a period during which deaths from other illnesses, such as breast cancer and heart disease, fell.

Because there can be a genetic component to Alzheimer’s, some experts believe that Life insurance applications will soon include questions about the cognitive abilities of family members (as they already do about a family history of cancer or cardiac disease). Bear in mind that the outbreak of the AIDS epidemic resulted in adding questions about HIV/AIDS to Life applications.

This focus on cognitive impairment among senior applicants offers one more reason for consumers to buy Life insurance when they’re young, in good health, and can benefit from lower rates.

You read it right. According to the most recent full-year data (2011) from the Department of Health and Human Services (HHS), the percentage of consumer spending on healthcare fell to its lowest level in decades. HHS based its conclusion on a nationwide analysis of premiums for individual and group Health plans, out-of-pocket payments and co-pay deductibles, and Medicare payroll taxes.

What’s more, despite the highly publicized rapid growth of high-deductible health plans and increasing contributions by workers to employer-run programs during recent years, the total amount coming out of patients’ pockets keeps shrinking.

Here’s why: According to HHS statistician Micah Hartman, families are facing pressures from the cost of healthcare because their medical expenses have grown faster than their incomes during recent years – not because they’re paying a larger percentage of the total. Consumers have seen their contributions to healthcare costs continue to decline during the past 25 years; although household expenses have risen throughout this period, medical spending from other sources has increased far more rapidly. This holds particularly true for federal and state programs such as Medicaid and Medicare.

To learn how you can get the best value for your healthcare dollar, please give us a call.

Is Permanent Life insurance for you? This type of coverage, unlike Term Life, does not expire and provides a tax-deferred investment or savings component (“cash benefit”), as well as a death benefit. As a rule, Permanent Life makes sense as a savings vehicle for high-income families, or those – such as small business owners – with illiquid estates, who want to pass along cash to their heirs.

If you’re considering Permanent Life, here’s what you should know:

1. Types of policies.
   1. Whole Life charges a fixed premium to fund a guaranteed cash benefit and death benefit; the shorter the pay period, the higher the premium.
   2. Universal Life offers a flexible premium that combines a Term Life policy with a bank account. You pay as much as you want, with the leftover funds earning a variable interest rate.
   3. Variable Universal Life works the same way, except that you can choose mutual fund-type options for investing your cash value.
2. Medical exam: As with Term Life, the insurance company will require you to take a physical examination. If you have a medical problem, you’ll probably pay higher premiums,
3. Investment benefits: You won’t owe state or federal taxes while the policy’s cash value grows until you make a withdrawal (at which time your tax rate will probably be lower). What’s more the “forced savings feature – requiring you to pay premiums – creates a financial safety net.
4. Costs: Because Permanent Life funds the policy’s cash benefit, as well as a death benefit, you’ll pay significantly higher premiums than for the same amount of Term coverage. Permanent Life also sets sales, administrative, and fund-management fees, as well as a mortality risk charge. In addition, if you cash in the policy during a certain period (usually 10 or 20 years) you might have to pay a surrender fee.

For more information on Permanent Life insurance, please feel free to get in touch with us at any time.

Buying private Health coverage will never be the same, as of October 1 – opening day for enrolling in the new state “health exchanges “created under the Affordable Care Act.

These markets will offer individuals and their families a choice of private Health plans resembling those under employer-provided insurance. The government will subsidize premiums for many middle-class households, while low-income people will be referred to safety-net programs.

You’ll be able to select your coverage online, through telephone call centers staffed by counselors, or (in many communities) from storefront operations or kiosks in malls.

You’ll no longer have to worry about getting turned down or charged more due to a medical problem. If you’re a woman, you can’t be charged more because of gender. The middle aged and people nearing retirement can be charged no more than 300% of what younger customers pay, compared with the 600-700% surcharge permitted today.

If all this sounds too good to be true, remember that nothing in life is free – and change isn’t easy. When coverage through the exchanges takes effect on January 1, 2014, the law will require almost everyone to have Health insurance or pay a fine (a mandate designed to get everybody paying into the insurance pool).

Some people buying coverage through the exchanges will experience sticker shock. Smokers will face a financial penalty. Younger, well-to-do people who haven’t seen the need for Health insurance might not be eligible for income-based assistance. Even those who receive these subsidies will find that coverage doesn’t come cheap. Although their monthly premiums will be less than the mortgage or rent, they might be more than payments on a car loan. On the other hand, their coverage will be more robust than under most individual plans.

Our agency’s specialists would be happy to help you select the Health plan that’s best for you and your family – just give us a call.

Health insurance costs are rising and the economy is uncertain at best. In this climate, more and more consumers are considering High-Deductible Health Plans (HDHPs), often known as Catastrophic Health insurance.

What are the benefits of HDHPs?

Some of these plans feature lower-than-average premiums (but with higher deductibles for all medical expenses, except qualified preventive care) up to the annual deductible. After that, some HDHPs pay 100% of your covered medical expenses. Others initially pay a share of your medical bills (such as 80%) before providing full payment when you reach an out-of-pocket maximum. Your premiums don’t count toward your deductible or out-of-pocket maximum.

In addition, many of these plans cover a full range of health care services — not just hospital and emergency medical costs.

Before you buy an HDHP, ask yourself these questions:

• How much can you afford to pay for Health insurance?
• What coverage do you need?
• What does the plan cover, and not cover?
• How much is the deductible, and how much, if any, would you pay in coinsurance up to the out-of-pocket maximum?
• Does the plan offer a strong, nationwide network of providers?

Our agency’s Health insurance professionals would be happy to help you determine whether an HDHP can benefit you and to find the plan that meets your needs most effectively. Just give us a call.

Let’s say you have a beer or one cocktail at a party, trip over the carpet, and wind up in the emergency room with a broken ankle. Now imagine the shock of finding out later that your Health insurer is denying your claim due to the presence of alcohol in your system.

Insurance claim denials for alcohol use are based on the 1947 National Association of Insurance Commissioners (NAIC) model law, which says that insurers should be allowed to deny claims for patients if they are injured while under the influence of alcohol. In 2001, the NAIC changed its recommendation and encouraged states and Health insurance companies to provide coverage for patients regardless of alcohol use. As a result, a number of states repealed or amended their laws. Today, any state can choose to either authorize or prohibit insurance exclusions for alcohol use, from one drink to actual intoxication.

Insurance companies follow their own policies, as well as state regulations, when making a determination about alcohol related claims. Some health carriers explicitly exclude paying claims that involve any use of alcohol. Many other insurance companies, however, will provide coverage regardless of alcohol consumption by the claimant.

To find out how your claim will be treated if you have a medical emergency after drinking, feel free to get in touch with us.

Most people buy Life insurance to provide an income source for their survivors. However you can also use a Life policy to save a host of other financial headaches. Consider these four examples:

1. Funding a bequest. A couple has a beach house that constitutes half of their wealth. Their two sons don’t care about the place, but their daughter has made vacations there a centerpiece of her family’s life. Because the parents can’t give the house to their daughter and have an equivalent amount for their other kids, they buy Life coverage for the value of the beach house. When the surviving spouse dies, the children will have the house, the other half of the estate — and, the Life insurance benefit.
2. Maximizing retirement income. Many people who expected to leave their children an inheritance before the 2008 downturn are using this resource to live on. Life insurance can cover a financial shortfall in retirement income. A couple who take out a reverse mortgage can use part of the monthly payment for a Life policy, which will preserve the value of the home for their heirs, while still keeping a roof over their heads. Knowing that your spouse will get an insurance payment on your death will free you up to maximize your benefit — however, the earlier you act, the better.
3. Paying college costs. An older couple who want to contribute to their grandchildren’s college costs can take advantage of the annual tax-free gift of $13,500 to each child. If they are worried that they won’t live to complete their program, they can insure themselves for the total amount, and find peace, knowing that their wishes will be carried out whether they write the last check themselves or leave it to their children.
4. Wealth replacement. The well-to-do can buy a Life policy that will cover the estate taxes on their holdings, so that their heirs will not need to sell investments while they’re grieving — or when prices are low — in order to satisfy the IRS. More complex strategies include combining Life insurance with an instrument such as a charitable remainder trust, which allows investors to donate an asset to charity while drawing the income that the asset provides.

For more information on getting the most out of your Life insurance coverage, feel free to get in touch with us.

In tough times, we’re all looking for ways to save money. When you’re healthy and working, it’s hard to imagine being disabled by illness or injury. But be careful about disabling your Disability insurance. When you need it, it’s often too late. Bear in mind that:

• One in three working Americans will suffer a disability that keeps them from work for at least 90 days before retirement (age 65).
• The average disability absence lasts 2½ years.
• More than 80% of working Americans don’t have enough Disability insurance.

There are ways to reduce the cost of your premiums. For example, you can choose a longer waiting period before your benefits begin, or elect a shorter benefit period.

If you have enough resources to cover all your expenses during the first three months of a disability, a longer waiting period might be appropriate. Your premiums will probably be lower for coverage that starts after you’ve been disabled three months than for a policy that pays benefits after just 30 days.

Often, choosing a policy with benefits with a shorter benefit period — say to age 65 instead of for a lifetime — will lower your premiums. However, bear in mind that choosing a benefit period of two to five years to reduce your premiums, ending before normal retirement age, could be tragic. The longer the disability, the more likely that it will pose financial hardship.

If you’re considering making changes to your Long-Term Disability policy, call us today!

When you apply for Life insurance, you’ll need to undergo a medical exam that measures your height, weight, and blood pressure, collects blood and urine samples, and checks your general physical condition. The results will become part of your insurance application. Unfavorable results, such as a high blood pressure reading, will probably result in higher rates.

To ensure that your exam is accurate and garners the best possible results, we’d recommend following these guidelines:

• Stay well-hydrated. Drinking water before the exam can make it easier to draw your blood, which is necessary for obtaining cholesterol readings.
• Fast for four to eight hours before the exam.
• Limit salt intake for an hour before the exam.
• Refrain from physical exercise and alcohol for 12 hours before the exam.
• Avoid caffeine and nicotine, which can elevate blood pressure. Black coffee is okay up to an hour before the exam, but adding cream and sugar is like going off your fast.
• Get a good night’s sleep. Being well-rested won’t necessarily affect your exam results, but might ease “white coat anxiety” — the tendency to exhibit elevated blood pressure readings during an exam.
• Know your medications. Generally you will be asked questions about your medical history during the exam, including whether you’re currently taking any prescription or over-the-counter medications.
• Test outside menstrual periods. Female applicants should not take the test when they’re menstruating.

Best of luck with your exam!