Very important coverage to consider is:
Liability limits (we recommend at least $300k) and this protects you in case of a lawsuit related to an at-fault car or boat accident or injury on your property,
Uninsured and Underinsured motorist coverage (we recommend at least $300k) and this protects you in the event someone injures you and does not carry enough liability protection on their policy, and
Replacement cost on your homeowners so if you do have a fire that completely destroys your home your policy will cover the total cost to rebuild your home using like materials.
By packaging the auto and homeowners policies together we can save you money.
In many cases we have been able to help clients fund these important policies through savings realized on their auto and homeowner’s insurance through our insurance carriers and/or through simply increasing their deductibles.
Many clients have a group benefit provided by their employer but this benefit rarely covers 100% of their income. Usually this benefit is 60% of salary up to a maximum monthly benefit and because the employer generally pays for this coverage the monthly benefit paid to the insured if disabled is taxable therefore decreasing the percentage of salary provided even further. This creates a significant gap in coverage therefore we recommend supplementing group benefits with an individually owned policy whenever possible. An individual policy benefit is not taxable because the individual pays the premium and when coordinated with the group benefit provides maximum income protection. Individually owned polices are also portable so if you change employers the coverage is still in place unlike a group policy.
One of the most important features of a health insurance plan is the lifetime maximum. This limit is how much the insurance company will pay out in expenses over your lifetime. Many plans have limits of 2 or 5 million. Some even have as low as 1 million, and a few plans have an unlimited lifetime maximum. Obviously unlimited is your best option.
The most common plans are group or individual HMOs, PPOs, and POS’s. The newest plan is a high deductible plan in conjunction with a HSA’s (Health Savings Accounts). These plans allow for individuals and businesses to set aside money in savings plans that grow income tax free. The money can then be used income tax free for qualified medical expenses. These plans typically work well for individuals who do not go to doctors frequently or who do not have high drug expenses.
In addition, many plans offer options such as inflation riders, joint policy discounts, paid up policies in 10 years or paid up at age 65, and return of premium features. We recommend clients think about the features that are most important to them and we can then choose an appropriate plan to meet their needs. The average age of the general population purchasing these policies is mid to late 50s. There is a new trend of younger individuals, in their 40s, beginning to purchase them to ensure they can meet underwriting requirements and in hopes to pay a lower premium.
Another important factor to consider is the type of insurance to buy. There are only two types: term which by definition is temporary insurance, and whole life which by definition is permanent insurance. All other types, universal, flexible premium…) are blends of term and whole life.
Term insurance starts off very inexpensive but the cost of term increases as you age. Therefore most individuals will pay for term all there lives and when they need it most (age 60+) the cost is so high that they end up dropping the policy. In this case they may have spent thousand of dollars and they will never receive a benefit. The best use of term insurance is for temporary coverage or until an individual can convert the term to whole life.
On the other hand, whole life starts out with a higher premium but the cost is fixed and will not increase. A portion of the premium is allocated to a savings component within the policy beginning as early as year 2 of the policy. This savings has a guaranteed rate of interest plus the possibility of dividends and can be used throughout the individual’s life for a number of things even to fund a child’s college education.
Most people have heard of the buy term and invest the premium difference between term and whole life strategy. This sounds good on the surface because initially term is so inexpensive but term costs will rise after the end of term, meaning less will be invested. There is also market risk that may cause the investment to lose money. Because of these factors, there are other strategies using whole life insurance that may create more protection and wealth especially if coordinated with other assets during the accumulation, distribution, and preservation phases of money.
Mutual funds offer beginning investors an opportunity to buy shares of stock of many companies inside the mutual fund therefore providing them diversification and potentially less volatility than they would have buying one individual stock at a time. An investor has choices as to the type of share class they can buy through an advisor: typically A, B, or C’s. A shares charge an up front sales charge but have lower annual expense charges than do B’s or C’s. B shares have a deferred declining sales charge over the first usually 7 years with higher annual expenses than an A share after which the share converts to an A share for purposes of the annual expenses. C shares offer no sales charge but have a higher annual expense for the life of the fund. For long-term investing, A shares are usually the least expensive and may also provide sales charge discounts if the investor invests larger sums of money. Before our clients purchase mutual funds with us we determine their risk tolerance and develop a portfolio of mutual funds tailored to their risk tolerance and objectives. Mutual funds are sold only by prospectus. Consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. Mutual funds are subject to market volatility and risk, and may lose value, including loss of the principal amount originally invested. Not a Deposit | Not FDIC or NCUA Insured | May Lose Value | No Bank or Credit Union Diversification does not ensure a profit or guarantee against loss. For additional information about the securities products and services offered through Park Avenue Securities (PAS), please visit the PAS website at www.parkavenuesecurities.com. From the participants prospective, 401ks, IRA’s and all qualified retirement accounts are wonderful tools for growth during the accumulation phase of money. Careful planning is necessary when using these funds for a majority of one’s retirement assets due to the possible challenges of these accounts during the distribution and preservation phases of money. For example: If the tax structure should increase in future years then tax distributions would be at a higher rate than when contributions were made. This would create a reverse tax strategy. For additional information about the securities products and services offered through Park Avenue Securities (PAS), please visit the PAS website at www.parkavenuesecurities.com. Annuities are much like IRAs with a life insurance component so they do have higher expenses than do IRAs. They also have surrender charges for 7 – 12 years. Because of this higher expense and lack of liquidity, the decision to purchase an annuity should be made carefully. Factors to consider are your age, health, investment and distribution time horizon, and other assets and insurance you already own. For additional information about the securities products and services offered through Park Avenue Securities (PAS), please visit the PAS website at www.parkavenuesecurities.com. These tax breaks are a definite benefit but these plans do require you to use these funds for education only. If your child receives a full scholarship you can transfer the funds to another child. Some of our clients have asked for more flexibility so we help them develop strategies using other products that provide for tax breaks, growth, and/or more flexibility. Managed Accounts provide a tiered approach to management and allow our clients to invest with institutional asset managers that otherwise might be unavailable to them. Managed accounts carry management fees that represent a percentage of the assets in the account. For additional information about the securities products and services offered through Park Avenue Securities (PAS), please visit the PAS website at www.parkavenuesecurities.com.
* Products not underwritten by the Guardian Life Insurance Company of America.
** Disability Income insurance underwritten and issued by Berkshire Life Insurance Company of America, Pittsfield, MA, a wholly owned stock subsidiary of The Guardian Life Insurance Company of America, New York, NY. Products not available in all states. Product provisions and features may vary from state to state.