Life and Health

Most of us like to believe that life is priceless — but in some cases, it’s important to figure out just how much your life is worth. Why would you do such a thing? Because calculating your worth will help you determine how much Life insurance you need.

Everyone’s a millionaire

Believe it or not, most people earn more than $1 million throughout their entire lifetime. Think of it this way: If you earn $50,000 a year, you’ll make $1 million within the next 20 years. Of course, most of this money goes toward supporting your family and paying day-to-day expenses like groceries, the mortgage, and utility bills.

If something were to happen to you, your income stream would come to a halt. What would your family do without the money they need to pay the bills and buy necessities? This is why it’s crucial not only to purchase Life insurance, but to make sure you have enough insurance to cover all of your family’s needs.

How much do you need? One way to figure out how much you’re worth to your family is to consider how much income you bring home each month. Then, you can buy a Life insurance policy that will pay your family a monthly income that is comparable to what you currently earn. For example, if you buy a $500,000 Life insurance policy and the death benefit proceeds earned 4% annually, your family would receive a monthly payment of about $5,137 for the next 10 years. If you want your family to receive more money each month or payments for a longer period of time, you’ll need to buy more Life insurance.

Other considerations. Unfortunately, figuring out how much Life insurance you need isn’t as simple as calculating your monthly income. In addition to replacing your income, you’ll need to think about other expenses your family might face if you die. For example, they might have to pay medical bills, hospital expenses, and attorney fees and make funeral arrangements. They will also have to pay off any outstanding debts you might have as well as taxes.

On top of that, you should consider your family’s long-term expenses. Not only will your family be left to pay the mortgage and the bills, but how will your family afford your children’s college tuition or wedding costs? Be sure to factor in any other sources of income your family earns — your spouse’s salary, Social Security survivor’s benefits, and investments — and the cost of inflation. Things become more expensive every year. You want to get a true picture of how much money your family will need in the coming years to determine accurately how much Life insurance to buy.

A unique number. Obviously, each family’s Life insurance needs will vary significantly. It all comes down to your income, your expenses, and your goals for your family. Finding the “magic number” is a challenge because it’s somewhat of a balancing act. You want to own enough Life insurance to protect your family adequately if something happens to you, but you don’t want to buy so much insurance that there’s no money left over to enjoy your life in the present.

The goal is to have enough Life insurance to safeguard your family without breaking your budget. If you want to pinpoint just how much Life insurance you need to protect your family, meet with our financial advisors or insurance agents. Our professionals can help determine how much you need to buy and what you can realistically afford in your budget.

If you’ve decided to purchase Long-Term Care insurance (LTCI), good for you. There’s no question that LTCI can help protect your family’s finances by covering the exorbitant costs of long-term care if and when necessary.

However, because LTCI is such an important and sometimes costly purchase, it’s vital that you do your research and buy a policy for the right reasons. Too many insurance companies persuade consumers to buy LTCI with exaggerated claims and “facts.”

When purchasing an LTCI policy, keep your eye out for these top five sales pitches:

1. An LTCI policy is a valuable tax write-off. This might be true in some cases, particularly for business owners, but this statement is a myth for many LTCI policy owners. Although premiums paid for a tax-qualified LTCI policy ultimately can reduce your tax bill, you have to itemize deductions to qualify.
   Additionally, for tax write-off purposes, LTCI premiums fall into the medical and dental expenses categories. This category is limited to expenses that surpass 7.5% of your income. So, if you’re income is $75,000, you’ll need more than $5,625 in unreimbursed health and dental care expenses before you can even add in your LTCI premiums.
   Plus, even if your LTCI premiums go above 7.5% of your income, you can’t include all of the payments in your medical and dental expenses deduction. Your premiums are deductible according to a sliding scale based on your age.
2. All assisted-living facilities are created equal. Under current law, there is no national standard definition for “long-term care facility.” Therefore, if your LTCI policy says it covers a stay in an “assisted-living facility” or “adult day-care facility,” this could mean something different depending on the particular policy and the state where the policy was created.
   Therefore, if you purchase an LTCI policy and then move to another state, there’s a possibility that there are no facilities in your new state that match the definitions of your policy. Obviously, this could put you and your family in a serious bind if you ever require long-term care. Before you sign on the dotted line, ask plenty of questions and make sure you fully understand what type of facilities the policy covers.
3. Buy now to lock in the price. When purchasing an LTCI policy, many consumers are under the false impression that their premiums will be the same forever. Although your premiums typically depend on your age at the time you purchase the policy, this does not mean the premiums will stay the same for the life of the policy. Your premiums can go up any time your insurance company enacts a rate increase, as long as the increase is approved by the state insurance commissioner.
   Additionally, LTCI is particularly vulnerable to rate increases because it’s relatively new to the insurance world. Insurance companies don’t have a sufficient amount of data to predict the number of long-term care claims they will face in coming years.
4. You should replace your current LTCI policy with a newer one. Although some LTCI policies might have an added benefit that your current policy doesn’t include, it might not be a wise move to switch policies mid-game. First of all, your premiums are based on your age at the time you purchase the LTCI policy. Therefore, if you switch to a new policy, your premiums could increase. On top of that, you might have developed a pre-existing condition since you purchased the first policy, and this might not be covered by the new policy.
   If you want to add benefits to your policy, you’re probably better off to upgrade your current policy instead of buying a new one.
5. An insurance company’s financial rating isn’t important. Before you buy an LTCI policy, check the company’s financial rating with Standard & Poor’s, Moody’s, A.M. Best, Fitch or Weiss — these are all reputable financial rating services. You might also want to contact your state’s insurance department for additional details on specific companies.
   Consult with one of our LTCI specialists to review these and other areas of this valuable coverage. We want to make sure that you’re getting the most for your LTCI premium.

Do you enjoy scuba diving? How much do you love those flying lessons? Feel like going bungee jumping this weekend? If these questions fill you with a longing to go indulge in your favorite extreme sport, beware. That sport might just affect your Life insurance premiums.

When underwriters review your health, hobbies, and history, they are determining how much risk you pose to the insurance company. The more mortality risk you and your lifestyle present, the higher your premiums will be. It’s important also to consider that the risk you pose to the insurance company isn’t strictly dependent on your current health or medical history. Any risky hobbies (also called avocations) you enjoy on a regular basis will also expose the insurance company to a higher risk of your death and subsequent death benefit payout.

Insurance companies know they’ll sometimes have to pay out death benefits on policyholders who have paid in very little in terms of premium from an unpredictable death caused by an unexpected illness or accident. A dangerous hobby poses a predictable threat of death supported by historical data. This allows the insurance company to quantify the risk and attach a dollar value to it.

Depending on the type of hobbies in which you participate, you might find the underwriter of your insurance policy including an additional premium in order to subjugate the risk your hobby poses. That additional premium allows the insurance company to lessen the financial burden that your added risk creates.

There are many different ways that an insurance company can increase your premiums.

• Flat Extra Premium: A flat extra premium is a flat dollar amount that is added to your premiums every month. That amount is fixed and included in your premiums for the life of your policy.
• Table Rating: A table rating is an additional percentage of the premium you’ll be expected to pay each month. Again, this amount is fixed for the life of your policy.
• Temporary Flat Extra: Like the flat extra premium, the temporary flat extra adds an additional fee to your premium but, in this case, only for a certain period of time. A temporary flat extra might be used for someone who is taking flying lessons or another dangerous activity that has a known end date.

Another option is to accept an exclusion from coverage for deaths caused by or in relation to that hobby. This could allow you to enjoy regular premiums with no additional charges, but does create the unease of having a dangerous sport go uncovered. A Supplemental Accidental Death policy might be your solution.

Be sure to disclose your risky hobby with our insurance agents, so we can help you to determine the best course of action.

Insurers develop their own specific guidelines for underwriting Disability insurance. However, what they all have in common is the criteria they use to determine eligibility, coverage type and amount, and rate. The following is a list of the key factors that help insurers make these decisions:

Age and gender – Younger applicants will pay less for coverage. Females typically pay more than males because they file more claims.

Occupation – Insurers examine both your job title and your specific duties to decide the type of coverage to extend you, and cost. Certain occupations, because of the nature of the duties performed, pose less risk than others.

Insurance companies group occupations together according to the level of risk they present, and they assign each grouping a rating class. This rating, represented by either a number or letter, indicates how hazardous the occupation is, the income level of individuals in the occupation, and the number and type of claims filed historically.

Income – This is a determinant of the type of coverage you’re eligible for, the amount of your monthly benefit, and your rate. Insurance companies use tables to decide how much monthly benefit you can receive based on your earnings. Insurers generally will issue at most 50% to 70% of your pretax earnings. This percentage will be higher if your income is low, and lower if your income is high. You’ll be asked to provide an income tax form or W2 as proof of your earnings.

Your level of income also affects the type of coverage you can buy. High income individuals can usually purchase policies with a broader definition of disability and more comprehensive coverage.

Medical history – Insurers will look at both the current state of your health and your health history to decide your eligibility. Your family’s medical history will be explored to see if you have a predisposition for certain medical conditions, such as diabetes, heart disease, or cancer.

In addition to the questions about your health, you’ll either be asked to take a paramedical examination, which includes a blood test and a urinalysis, or a full physical examination.

Lifestyle – The types of activities in which you take part can increase your chances of suffering a disability. Not only does the insurer ask you directly about your activities, but it might also get information from databases, credit bureaus, and other organizations. It can even question your friends and family.

After your insurance agent has gathered all of this information, it’s reviewed by a home office underwriter. Either you’ll be issued coverage right away, or you’ll be asked to submit additional information to determine whether you’re an acceptable risk.

You’ll be assigned to one of three risk categories:

1. Preferred risk – You are less likely than other insureds to file a claim. Preferred risk status means you’ll pay less for coverage.
2. Standard risk – This is the category assigned to most insureds. Being designated a standard risk means you’re no more or less likely to file a claim than any other insured.
3. Special or substandard risk – Assignment to this category means that the insurer feels that there’s a high probability that you’ll file a future claim. If the insurance company decides to issue coverage, they’ll do so with the inclusion of an amendment that either fully excludes certain medical conditions or excludes them for a period of time. Your policy will have a longer elimination period, and a shorter benefit period. The rates charged to special risk insureds are much higher than for the other two categories.

When you sign up for new Health insurance coverage, it’s extremely important to select the best primary doctor for you and your health plan. Not only do you want to select a competent, experienced doctor who will provide you with exceptional medical care, but you also need to ensure that he or she will provide health care services as specified under your insurance policy.

Although you might be tempted to simply choose the doctor with the office closest to your work or home, you should not take this decision lightly. Choosing the best doctor requires a great deal of research. Take the time to look into your potential doctor’s credentials and find out how well they work with your specific type of insurance plan. After all, your physical and financial health could depend on it.

Different plans, different doctors

If your Health insurance plan is an HMO or PPO, you’ll probably be limited in your choice of doctors. These plans typically provide a list of “network approved” doctors from which you can choose your primary physician.
However, you can usually choose someone outside of your health plan’s network at an additional cost. If you can’t find a suitable doctor within your network, it may be worth the extra expense to do this.

Pinpointing the best doc

Here are a few steps you can take to find the most appropriate doctor for your unique healthcare wants and needs:

• Get recommendations: Ask friends, family members and coworkers if they can recommend a doctor. If people you know and trust have been happy with a doctor’s care, the odds are that you’ll be satisfied too.
• Consider going out of network: Even if a friend recommends a doctor who is outside of your health insurance network, you should add that doctor to the list of “approved” doctors you are considering. Check into all of these doctors — it might be worth the higher price tag to use an out-of-network doctor if no one within the network suits your needs.
• Research credentials: Once you have a list of potential doctors, call each doctor’s office and inquire about their education, training and experience. You might also want to ask about specific qualities that you are seeking in a doctor. For example, if you prefer a woman as opposed to a man, a doctor of a certain age or religion or even a doctor who attended a certain type of school, you should ask all of these questions.
• Check with medical associations: You might also consider finding more information about potential doctors from the American Board of Medical Specialties (ABMS) or The American Medical Association (AMA). These associations offer professional information about doctors throughout the country. Visit the ABMS website at http://www.abms.org/.
• Find out if they’re board certified: Although doctors are not required to be board certified, this is important to some patients. Doctors have to complete additional years of training in a specialty and pass an exam in order to be board certified. You can call the ABMS at 1-800-776-2378 or visit their website to learn more about board certification.
• Learn about complaints: You might also want to contact your state department of insurance to find out if any complaints have been filed against your potential doctor.
• Meet face-to-face: Once you have narrowed down your list of doctors, you should set up an introductory appointment with each of them. Although some offices charge a small fee for these types of visits, it’s well worth it. This will allow you to get a feel for the doctor’s personality and ask him or her questions first-hand.

In July 2008, State Farm Life Insurance Company announced the results of its first ever Fiscally Fit Cities Report, whose findings indicated that less than 50% of American households are making provisions to secure their financial future. The report measured citizens in 50 metropolitan areas in terms of investments, quality of life and Life insurance coverage. Twenty-seven criteria were analyzed that demonstrate what Americans are doing to maintain their finances.

The researchers discovered that citizens in the cities deemed most financially fit were creating strategies to protect their assets with short-and long-term investments. However, what was missing was a holistic approach to personal financial planning, including owning enough Life insurance coverage to keep their families afloat after the sudden death of a wage earner.

Surprisingly, researchers found that citizens in areas with high household incomes were not saving enough nor protecting assets adequately, as you would expect. In fact, people in wealthier areas spend more on real estate and are less disciplined in saving money and purchasing Life insurance to protect their family.

Ultimately, the data revealed two concerns: Americans aren’t looking at their finances as a complete package, and they don’t understand the importance of Life insurance.

As a rule of thumb, most people require seven to 10 times their annual income in Life insurance benefits if their family is to maintain a comparable standard of living at their death. The other issue is not insuring all of the family members who need coverage. Many families believe the primary wage earner should be the insured; however, they fail to realize that a stay-at-home spouse or a second wage earner also needs Life insurance.

In addition to examining your Life insurance needs, consider these simple steps to plan for tomorrow:

• Take care of yourself – Good health leads to a longer, fuller life and more options for generating income later in life. Good health can also help control costs, particularly for insurance policies.
• Stay balanced – Although it’s tempting to spend when you are doing well, without proper planning you might need to lower your standard of living later in life. It’s smarter — and less disappointing — to live conservatively and prepare for the unexpected.
• Start early – You’re never too young to reduce debt and live within your means, invest wisely, protect your assets through Life insurance, and enjoy a healthy lifestyle.

Since Term Life insurance policies accrue no cash value, most policyholders see no return on their investment unless they pass away during the policy’s term and a death benefit is paid out to their beneficiaries. This is true of any insurance policy — if your home never burns to the ground or your car accident history is squeaky clean, you’ll never see one dollar from your Homeowners or Auto insurance.

Wouldn’t it be nice if your Term insurance policy could act like a piggy bank for you — storing your premiums up for a full refund should you outlive the policy? Believe it or not, with the right rider added to your policy, it can. Unlike other types of insurance, many Term Life policies offer a return of premium (ROP) rider that guarantees a return of the premiums paid if you outlive the policy.

When a ROP rider is added to your policy, your premiums will increase. When determining whether the ROP rider is in your best interests, you must consider whether the funds paid for the rider would be better invested elsewhere.

As an example consider a 10-year Term Life insurance policy with a premium of $600 per year. If the ROP rider adds an additional $300 per year, you will pay $900 per year or a total of $9,000 over the life of the policy. At the end of that 10-year term, you will receive the entire $9,000 back from the insurance company.

Otherwise, without the ROP rider, you’d have an extra $300 per year to invest — but you would need to earn greater than 16% per year to accumulate $9,000 after 10 years. In addition, refunds received under the ROP rider are tax-free, while you’ll pay income taxes on interest earned in your savings account.

There are certain conditions you must meet to receive the return of premium guaranteed by the rider. If you forget to make a premium payment or allow your policy to lapse, you might no longer be eligible for the full premium payout of your policy, so it is important to keep the policy in force or you will be wasting the extra premium dollars you send to the insurance company.

When spouses develop their financial strategy for retirement, they consider what is best for them as a couple. They typically ignore one very important reality; and that is that one spouse will outlive the other, and could conceivably go on for a number of years. That means to really be ready for retirement, every couple also needs to design a plan to ensure the surviving spouse’s financial well-being for the rest of their retirement life.

Consider the following tips:

• Take financial inventory – Start by making a list of the income that will exist before and after the death of each spouse. Be sure to include retirement assets that are listed in only one spouse’s name, and any Life insurance policies in which one spouse is the named beneficiary.
  If you don’t have Life insurance, consider purchasing it for extra protection. If you intend to buy a policy, do so before you retire, because as you age, Life insurance become more expensive, and you won’t get as much coverage for your money as you would if you were younger.
• Know if your pension plan requires that an option for a survivor’s benefit be made available – Traditional defined benefit pension plans are covered by the Employee Retirement Income Security Act, which mandates that the plan participant must be offered an option for a surviving spouse annuity. To select the survivor’s benefit, choose a joint and survivor annuity payment, which means the amount you receive during your lifetime is reduced, but the income stream continues after your death.
  You can choose not to receive this benefit, but only with both spouses’ signatures on a form witnessed by a notary or plan representative.
• Be aware of how Social Security benefits change after a retiree dies – The Social Security spousal benefit pays up to one-half of a retired worker’s benefit while the worker is living, but it stops when that worker dies. However, a surviving spouse who is at full retirement age or older gets all of the deceased worker’s full benefit or their own, whichever is larger.
  Surviving spouses who are younger receive reduced survivor’s benefits, depending on their age. When they reach full retirement age, they can choose to receive their own full benefit if it’s higher than the reduced survivor’s benefit that they’d been receiving.
• Consider the impact future events will have on your finances – Think about healthcare needs, and whether your spouse will have company provided healthcare coverage after your death, or if they will have to purchase their own. In addition, you should also seriously consider whether you should buy long-term care coverage.
• Get the advice of a reputable financial planner – If your retirement assets include a combination of 401(k) plans and IRAs, it’s a good idea to sit down with a certified financial planner to get some projections of how long your money will last. A competent planner can offer suggestions as to how to make the most out of what you have.

By now, you’ve probably heard countless harrowing tales about identity theft. After all, according to the Federal Citizen Information Center, it’s the fastest growing crime in the U.S. A Gartner Research study reports that another consumer becomes a victim of identity theft every two seconds.

Once they fall prey to this insidious crime, identity theft victims often suffer financially, professionally and even emotionally. Unfortunately, there’s a specific type of identity theft that can cause a person even more harm: Medical identity theft.

TAKING OVER YOUR MEDICAL CHARACTER

When an identity thief steals your insurance card from your wallet or somehow gets hold of your social security number and insurance information, he or she can then receive medical care and file false insurance claims under your name. This could not only lead to financial troubles, but also health record inaccuracies that endanger you in the future.

For example, let’s say an identity thief who has stolen your wallet takes your insurance card to a doctor and claims to be you. His blood type, drug allergies and pre-existing conditions are likely different from yours and, once this data is recorded, it will be mixed in with your medical files. If you then go to a hospital for care, you could receive the wrong diagnosis or treatment based on the thief’s medical history. What’s more, because the thief is receiving treatment under your name, you might suddenly find that you’ve reached your insurance payment maximum. Or you could become altogether uninsurable because of claims filed by the thief.

Another side effect of medical identity theft? Professional problems. You might have a hard time finding a job based on medical conditions that thief has — under your name, of course.

HOW DOES IT HAPPEN?

Having your insurance card stolen isn’t the only way you can fall victim to medical identity theft. Some health care workers have been caught selling patient information to identity theft rings. The health care industry works hard to keep this from happening, but it’s practically impossible to guarantee that no worker with access to patient files would ever make such an unethical choice.

DETECTING MEDICAL IDENTITY THEFT

Identity theft experts say that victims typically don’t realize they’re victims until they receive an “explanation of benefits” notice from their insurance company for services they never received. Unknowing victims might also receive calls from collection companies asking them to pay suspicious medical bills or might notice strange activity on their credit reports.

Unfortunately, once you detect medical identity theft, the problem can be hard to shake. Even with an identity theft police report, some victims have a tough time convincing collection agencies that they did not receive the medical care. Many victims also struggle to correct their health care files under the Health Insurance Portability and Accountability Act (HIPAA). Although this act was created to protect the privacy of patients, it often creates some tricky obstacles for victims looking to resolve medical identity theft problems.

FEW CASES, BUT ENOUGH TO CAUSE CONCERN

According to the Federal Trade Commission, more than 8 million Americans were victims of identity theft in 2005. Of those, only 3% had their information misused so the thief could obtain medical treatment or supplies.

However, while medical identity theft remains a relatively small threat, there have been enough cases to cause concern in the health care industry and the government. The U.S. Health and Human Service Department recently hired the strategy and technology consulting firm Booz Allen Hamilton to study the magnitude of the country’s medical theft issues. In addition, the Blue Cross Blue Shield Association recently announced that its anti-fraud investigators prevented $134 million from being spent on false medical claims in 2007. They also recovered almost $115 million paid on fraudulent medical claims, including some made by medical identity thieves.

In an effort to stop medical identity theft, some health care providers are asking patients to show their driver’s licenses or another photo ID along with their insurance card at doctor’s offices.

A long-term disability can have a devastating impact on a family’s finances. When you become sick or injured and cannot work, not only could you lose your income, you could lose all of your savings, investments and other assets as well. Without a steady income, you’d eventually have to tap into these assets to pay for your costly medical bills, your mortgage, utilities and other daily expenses.

Luckily, Disability Income (DI) insurance can offer your family much-needed financial protection in this scenario. But if you’re young and healthy or if your spouse also works, you probably assume you have no need Disability Income. You couldn’t be more wrong. Here are five of the most common Disability Income myths disproved:

Myth #1: I’m too young to buy DI insurance.

You would be surprised to learn how many young adults suffer from a long-term disability. According to the Social Security Administration, nearly three in 10 of today’s 20-year-olds will become disabled before they reach the age of 67. On top of that, you are five times more likely to become injured during your working years than you are to die before the age of 65, according to a study by Great-West Life.

In other words, you are never too young to suffer from a long-term disability, which means you’re never too young to purchase Disability Income insurance.

Myth #2: I don’t need DI because I’m healthy as a horse.

As we all know, good health can come and go like a flash of lightning. Even people who eat well, exercise and take great care of themselves can suffer from a stroke, cancer, a neurological disorder or an unexpected accident.

Myth #3: Only people with high-risk jobs need DI coverage.

Far too many people are under the impression that Disability Income is most often paid out to blue-collar workers who are injured in a workplace accident or professionals who are disabled in a car accident. Therefore, people who work from home or at a computer desk in a comfy office assume they don’t need DI coverage.

The truth is that non-work-related accidents or jobsite injuries are not the primary causes for worker disabilities. Most workers are disabled by a chronic disease, such as cancer or musculoskeletal problems, conditions that can strike anyone, anywhere, any time.*

Myth #4: If I were disabled, my spouse’s income would cover us.

If your spouse works, you might assume his or her income would be enough to pay the bills for a few months if you were sick or disabled. If your spouse doesn’t work, you might think he or she could find a job if something happened to you.

However, don’t you think if you were diagnosed with a disease or seriously injured, your spouse would rather be caring for you than running out to find a job or working overtime to pay the bills? Typically, if a family has DI insurance, both the injured worker and the spouse end up living off of the insurance benefit even if the spouse was working previously.

Myth #5: I don’t need DI insurance because I’m covered through my company’s group policy.

Although many workers receive Disability coverage through their company, it might not be enough. Most group DI insurance contracts will cover only a percentage of your salary (usually 50%-60%) and the benefits are usually fully taxable. Would your family really be able to live off of just 60% of your salary, especially considering that you might be facing some lofty medical bills? Probably not.

Most financial experts recommend that you go ahead and take advantage of your company’s group coverage if they offer it, but also buy individual coverage to fill in the salary gaps.

As you can see, everyone stands to benefit from Long-Term Disability coverage. Without coverage, an unexpected disability could end up crushing your family’s finances.

* http://www.investors.unum.com/phoenix.zhtml?c=112190&p=irol-newsArticle&ID=1138518&highlight=