When my husband died I was 24 and neither of us had life insurance. Three weeks prior we learned that FMLA (Family Medical Leave Act) was approaching its 12 week limit and we would lose my husband’s work issued life insurance policy. With his cancer diagnosis, there was no possibility of being approved for any life insurance policy. It was too late.

When I was 22 and marrying my husband I never would have imagined that at 24 I would a) need a life insurance policy or b) that it would be too late to purchase a life insurance policy for my husband. We were both young, active and healthy enjoying our newly married lives. While both of us had experience death and serious illness with our parents, we did not believe we needed to worry about long term planning for quite some time. We both wanted to be established in successful careers and buy a home before making decisions about our long term wishes and financial goals. To us, life insurance was a perk that came with his great new job as an HVAC repairman. We believed that his work life insurance policy would offer us enough protection until we became more established.

In the past year I finally went through the process to place a life insurance policy on myself. I do not own a home. I do not have children. My largest debt are student loans from community college. To the average 20-something it doesn’t seem necessary to have a life insurance policy. Now that I know the costs of funeral expenses, having to process end of life affairs, and the possibility of high medical bills due to death or illness, I know that a life insurance policy is a necessity, not a perk.

Life insurance for myself was simple to obtain and inexpensive. It was a quick and painless process that involved meeting with my insurance agent, having an at home examination, and paying the bill. Now that I have this in place, I know that if I died, my family would have the financial means to be able to pay for my funeral, pay off all of my bills and debt, and have some extra money for what I term the ‘death fund’. This can be everything from affording some time off of work, paying to travel to see family in other areas of the world, going on a vacation to escape it all; whatever the choice, I want my family to have options when I die.

As a young adult, especially if you are married or a parent, life insurance is important to protect yourself against the ‘what ifs’ in life that you hope never happen. The assumption that it will not happen to you is naive, and the best way to protect your family and ensure a more stable future is to speak to your insurance agent about life insurance. Go with someone you trust, and it will make the experience much more pleasant.

Learn more about Brenda on her blog at http://crazywidow.info/. Also support Brenda’s non-profit organization Keepin’ it Kevin to promote awareness and provide research funding for Angiosarcoma cancer.

In a prior post we discussed, how term (temporary) life insurance is a good deal for young families because it is extremely affordable and it protects your family until you become financially independent. However, since term life insurance generally only last 10, 15, 20 or 30 years it is extremely important to make sure your term life insurance has a convertibility option.

When term insurance has a “convertibility option” it simply means that you can take all or a portion of the term life insurance benefit and convert it to permanent life insurance at the original health rating. That was a mouthful of an explanation so let’s look at an example.

At age 25 you took out a $250,000 term life insurance policy that lasts 20 years and you locked in a “preferred” rating because you were in good health. Then at age 44 you realize you still need life insurance because you bought a bigger home with a bigger mortgage and you will still have kids around for another 5 years. However, your term policy is going to expire within a year and your health is nowhere what it was at age 25. What are your options?

Option 1 – Gamble

If you have a legitimate need for life insurance I don’t think gambling that something will not happen is a good option for you or your family. That being said, it is an option.

Option 2 – Buy Another Term Policy

This may be a good option if you are in good health but since you have had a few medical issues a term policy would be extremely expensive if they would even offer you a policy at all.

Option 3 – Convert  

If you bought a convertible term life insurance policy and the term has not expired yet, you can “convert” all or part of the $250,000 to permanent life insurance that lasts up to age 121. The best part is the price for the new converted insurance is based on your “preferred” health rating that you locked in at age 25. Even if you had been diagnosed with cancer you still are guaranteed the “preferred” health rating from age 25 on the new policy.

As you can imagine unexpected event(s) occur in everyone’s life and the need for life insurance can change over a 10, 15, 20 or 30 year term. The convertibility option gives you the flexibility to make your life policy last longer and lock in a health rating no matter what medical condition develops. When shopping term life insurance make sure to ask if the term quote has a convertibility option and how that option works. It is normally very inexpensive or automatically included on most term life policies and having the convertibility option can literally change you and your family’s life.

Photo by Scott Keuper via LancasterOnline

Just two days after Christmas I got a call from my wife, who was extremely upset, because our neighbor’s house was engulfed in flames.  Thankfully, no one was injured by the fire.  I arrived home about an hour later and the firemen were still fighting the flames that were being fueled by 30 mph winds. As I walked up to my house that was completely blocked off by emergency crews and fire hoses, debris and smoke filled the air. This was the second fire in our neighborhood in the last 3 months and I remember telling my wife that I never want to experience the heart-breaking smell of a house fire ever again.

The home that caught fire was a unique 1700’s stone mill house that people would admire when they walked or drove by. When I tried to explain to people where I lived, I actually used this as a reference landmark because so many people knew where it was located. The reason I bring this up is because the materials needed to rebuild this home were unique and they just started rebuilding the house this past March.

Photo by John Crawford via LancasterOnline

Then two weeks ago on May 26^th we had a small group of friends over to our house when someone said they smelled smoke. At first I thought they were joking because it was the evening major storms rolled into our area and we were watching the weather channel to make sure no tornados were coming our way. After realizing they were serious, I ran outside and to my devastation I saw the same house that caught fire in December was on fire again. This time the 3 car attached garage was on fire and the heat was so intense that I could feel it in my driveway 100 yards away. Again no one was injured but I will never forget seeing the owner’s crushing reaction as he walked up to see their home was being lost again.

As the firefighters tried to save the hard work that was done on the home from the first fire, we stood and tried to comprehend how this could happen twice to the same house and family. The probability had to be unfathomably small that the same house could catch on fire twice within 6 months.

I tell this story because many people, including myself, put important things off, like buying enough life insurance, disability insurance or completing a will. We think that we can either avoid a “lightning strike” in our life or we hope it won’t happen before we get to it. So if you have an insurance need, a will or anything else that you know is important but you have been procrastinating, please don’t wait. As a first hand witness, “lightning” can strike unexpectedly anytime, and in the most unimaginable ways, it can strike twice.

Primary Disability Pricing Factors

Occupation – Even though nearly 90% of disabling accidents and illnesses are not work related, what you do as an occupation does have a large impact on disability insurance rates. Occupations that are more hazardous and physically demanding will have higher rates than someone who works primarily in an office.

Health – Similar to life insurance, disability insurance will review your medical history, including build and tobacco use. For larger disability policies they may also require a paramedic exam (blood & urine).

Benefit Amount – This is the portion of your salary covered by the disability insurance. Generally, you can replace between 45%-75% of your salary, and benefits are normally paid on a monthly basis. Disability policies normally do not replace a 100% of your income because most individual policy benefits are paid tax-free.

Benefit Length – This is the length of time you will receive payments from your disability policy. Generally, you can choose from: six months, one-, two-, five- and 10 years, or to age 65. A general rule of thumb is any policy less than 2 years is “Short Term Disability” and over 2 years is “Long Term Disability”.

Waiting Period – Most insurance policies have a deductible that requires you to pay a specific amount out of pocket before the insurance will start paying any benefits. The waiting period for disability insurance is the same thing as a normal insurance deductible except it is based on time instead of dollars. Generally, you can choose to wait 30, 60, 90 or 180 days before you start receiving disability benefits. The longer the waiting period, the lower the price for the insurance.

What Qualifies as being Disabled?

When shopping disability insurance, it is critical to understand what qualifies as being “disabled,” because this definition will determine if and when you will receive benefits from your policy. Most policies will define “disabled” as either when you cannot perform your own occupation (Own Occ) or when you cannot perform any occupation (Any Occ).

A policy with an “Own Occ” disability definition has much broader coverage than a policy with an “Any Occ” definition. It is important to know the definition of “disabled” when shopping disability insurance and not focus solely on the price. Otherwise, you could be paying for a policy that might not replace your paycheck when you need it.

Overall, Disability Insurance is one of the most important but one of the least talked about insurance coverages. Most people either believe the odds of becoming disabled are negligible or a program like Social Security Disability will replace their entire income if they are unable to work. However, just like so many things in life, education is key. As we finish up Disability Awareness Month, please consider sharing this article or the official Disability Insurance Awarness website with a friend or family member that needs to protect their paycheck.

We protect our cars and our homes, but a large number of families’s do not protect the absence of a paycheck.  For 70% of Americans, not earning a paycheck would create financial difficulties within one month. Disability insurance (DI), sometimes referred to as income protection, is exactly that -protecting your ability to earn a living. If you become sick or hurt and unable to work, you’ll receive payments to help you continue paying living expenses such as rent, mortgage, car payment, food, insurance, utilities, medical expenses and more.

The Real Risk of Becoming Disabled

Unless you have experienced being disabled or know someone that has become disabled, most people think the odds are very small that something could happen to them. However, nearly one out of three women and one out of four men can expect to suffer a disability that keeps them out of work for 90 days or longer at some point during their working years. Long term disabilities are also a reality. One worker in seven are expected to be disabled for five or more years before retirement. When you imagine a 30 year-old earning $50,000 per year being disabled for life, that could be more than $1.7 million in lost future earnings.

Sources to Replace Your Paycheck

Workers Compensation: If you are a PA employee and sustain a job injury or a work-related illness, the Pennsylvania Workers’ Compensation Act (Act) provides for your medical expenses and, in the event you are unable to work, wage-loss compensation benefits until you’re able to go back to work. Wage-loss benefits are equal to approximately two-thirds of your average weekly wage, up to a weekly maximum. Remember that this coverage only applies to employees and disabilities at work. According to The National Safety Council nearly 90% of disabilities occur outside of work and Workers Compensation would not be available for the vast majority of disability cases.

Social Security Disability: Most salaried workers in the United States participate in the federal government’s Social Security program that also can provide disability benefits. However, eligibility is based on being unable to perform any gainful employment (not just the job you were performing at the time the disability began), rougly 60% of applicants are initially denied and the average benefit is just above the poverty line of $1,004 per month.

Employer-Sponsored Disability: Many employers, especially larger ones, provide employees with group disability insurance. These types of policies provide income protection both inside and outside of work and typically replace 60% of your base salary. If you have disability through work, find out what benefits your employer offers. Sometimes employer plans may only last 6 months or have a 180-day waiting period before any payments are made. A group plan is not customized for specific individuals and the benefits may not meet your financial needs.

Individual Disability Insurance: An individual disability policy is the most flexible and reliable way to protect your paycheck. Policies are specifically tailored to your financial situation and the policy is owned by you, meaning you don’t have to worry about losing coverage if you change jobs. Generally, policies are paid with after-tax dollars, meaning the benefits you receive will be income-tax free.

Overall, Disability Insurance is one of the most important but one of the least talked about insurance coverages. Most people either believe the odds of becoming disabled are negligible or a program like Social Security Disability will replace their entire income if they are unable to work. However, just like so many things in life, education is key. As we enter into Disability Awareness Month please consider sharing this article or the official Disability Insurance Awarness website with a friend or family member that needs to protect their paycheck.

Tom recently wrote a blog article on what I consider to be a very important topic: Getting life insurance through your employer versus getting it on your own. In my personal experience people usually don’t realize that life insurance through work is an option, they assume whatever the employer provides is enough to meet their needs and the long term costs of both options are rarely explored. Tom breaks down these topics and many more in his guest blog post below.

Post by Tom Bigoski of Bigoski Insurance

First of all, the information given in this blog article is very general and your personal situation may certainly differ.  This article is meant to get you thinking (and hopefully saving $). 

I’ll get the easy part out of the way. Employers generally pay for coverage equal to 1-2x an employee’s salary. You won’t be able to get this coverage from someone like me for free, so take it! However, most homeowners and parents have a much larger need than that. So if you need additional coverage, here are some things to consider when you compare “Get it from work v. Get it on my own”:

- When you buy group insurance, you have no control over the policy. The company can cancel it at any time.  They can also stop offering it at any time. They own the policy. This won’t affect you…until they stop offering it.

- If you leave your job, you generally can’t continue your coverage. If there is an option to “convert”, it’s usually at a much higher cost.

- 99% of all Group life insurance I have ever seen goes up every 5 years. The “age bands” are normally as follows:  25-29, 30-34, 35-39, 40-44, 45-49, 50-54, and so on. (See example below)

- Look around the office at the other folks in your age band. You are basically sharing the risk with all of them. If you think you’re healthier than others in your group, then you may be able to save big money by purchasing on your own. If not, then price-wise, group insurance may be a better option. If you are “uninsurable” and your company offers a guaranteed policy issuance option, that may be the best option for you.

- I’ve seen group life insurance policies that only cover natural death and not accidents. Are you kidding me?

So here’s an example from a “group term insurance” rate sheet that I found online: a 35-year old healthy male pays for $200,000 coverage through work. At this particular company, here is how much this man would pay annually over the next 30 years:

• 35-39:  240/year
• 40-44:  384/year
• 45-49:  672/year
• 50-54:  1176/year
• 55-59:  1992/year (yikes)
• 60-64:  3336/year (double yikes)

Total Paid over 30 year:  $39,000

If this same man is a non-smoker in reasonable health, he could get a 30-year policy for between 233-407/year…locked in and rate won’t change over the 30-year term. Over 30-years, total is between $6,990 and $12,210. Huge savings! 

Unfortunately what happens is that an employee gets a job when they’re young, doesn’t notice the small premium, and then over the years, it creeps up on them. You may not consider yourself “young”, but I guarantee you’re a year younger now than you’ll be next year. Do yourself a favor: look at the cost of your group life insurance this year and if you aren’t sure whether you’re getting the best short-term and long-term deal.

Find other great blog articles on Tom’s website and along with fun content on his business Facebook page.

Auto Insurance Options

Many times parents are surprised to learn that they can purchase a limited form of life insurance on their auto insurance policy. For example, First Party Accidental Death coverage acts like a life insurance policy if you, your spouse or your resident children die as a result of a car accident only, even if you were a passenger in someone else’s auto. It literally can cost a few dollars a year and you can add up to $25,000 in Accidental Death coverage to your policy in Pennsylvania.

Another inexpensive option on your auto insurance policy is First Party Funeral Benefits coverage. This coverage works the same as Accidental Death coverage except the maximum benefit is $2,500 in Pennsylvania and benefit must be used for funeral expenses.

Life Insurance Options

Since the coverages offered on auto policies can be limited with inadequate benefit amounts, many families will look at a life insurance option. If you already have a life policy on yourself and/or your spouse, you may be able to add a Child Rider to one or both of your policies. This would insure your child for a set premium and a set limit, often between $1,000 and $10,000 per child. Again, this is very inexpensive and the premium for a child rider is the same whether you have one child or a dozen, so it is an especially good choice for large families.

If you are looking for more than $10,000 of coverage or you want your child to have their own policy, there are a wide variety of Universal, Whole and Term Life policies you can purchase for a child of any age. If they are under the age of 18 years, a child will most likely receive a standard life insurance rate, so, if your child is in good health with no medical issues, I often recommend applying for a new life policy once they are 18 years old, so they can receive the best life insurance rate and lowest premium.

Remember when you are considering life insurance for yourself or a child, it is not just about having enough money to cover the cost of a funeral, but to include funds to pay off emergency or long term medical expenses, college debts, estate settlement and other unexpected expenses.

Unfortunately, having enough life insurance won’t necessarily make you feel any better about tossing the car keys to your teen on a Friday night out with his or her friends, but it will give you some financial peace of mind as you raise your teen to become a safe and responsible adult.

Photo provided by listal

Many of you have seen the movie that seems to play every year around this time, “National Lampoon’s Christmas Vacation.”  Or, as my wife affectionately calls it, “The Griswold Family Christmas.”

Whatever you want to call it, I’m sure there are some classic scenes that stick in your memory.  For me, some of those scenes are…

 1. Clark’s run-in with the attic stairs (my personal favorite!)

2. A Squirrel running through the house

3. Uncle Eddie emptying the RV waste in Clark’s front yard, with explosive results

4. A cat being electrocuted (This scene is particularly enjoyable for dog-lovers…)

5. Clark’s desire to install a swimming pool with his year-end bonus

6. Clark’s boss “kidnapped” by Uncle Eddie

7. An electrical outlet with too many things plugged into it

8. An icicle flying into the neighbor’s house

I could go on and on…You remember those scenes, right?  Well, more than providing us with a good laugh, these scenes can teach us a thing or two about insurance.  Don’t believe me?  Let’s look at each scene in order…

The 8 Insurance Lessons

1. Your homeowners policy won’t pay for your injuries after a close encounter with the attic stairs.  You would need Health Insurance for that.  So, if you need to get something out of the attic, have your Cousin Eddie do it…

2. Damage to your home from rodents and pests, including from your own pets, is generally not covered on your homeowners policy.  So, don’t leave the catnip, a raw slab of meat, or the mailman lying around.

3. Consider purchasing Life Insurance, and if you’re a smoker, watch where you light up. 

4. If you have pets, consider pet insurance.  Your homeowners policy may not cover Fluffy’s death by electrocution.

5. Swimming pools are covered under the “Other Structures” section of your homeowners policy.  However, there may be a limit to the amount of coverage extended to a pool.  So, make sure you have enough coverage, or build a small one.

6. Intentional acts are not covered.  Don’t kidnap your boss.

7. Make sure your home is insured for 100% replacement cost, and consider a policy that offers Guaranteed Replacement Cost.  And remember, besting your neighbor’s light display is best left to the movies.

8. Make sure your liability limits are adequate and consider a Personal Umbrella Policy, which increases your liability coverage in the event you do accidental damage to your neighbor’s mansion, master bedroom and massive home theater system.  What’s more, icicles, in general, are a potential sign of ice damming, which could cause water damage to your property. 

See, I told you we could learn something about insurance!

Now, I know what you’re thinking.  No one wants to think about insurance the next time you sit down at your table to enjoy the holiday feast.  But remembering these tips, as silly as they may be, can go a long way in protecting you and your loved ones during this holiday time and beyond.

And maybe, most importantly of all, remember the greatest lesson we can learn from the Griswolds…a dysfunctional family is still a family.

Photo provided by Flixster

Happy Holidays everybody!!

What would you do without the value such a key person brings to your business?  The death of a valued employee could have a fatal impact upon what you do.  The loss of an important person to your organization is just like losing a key piece of operational equipment.

It’s not just the output of the person you are losing. There are other considerations as well.  Premature death of a highly valued employee could have a significant effect on your credit rating.  The loss of the person’s abilities or reputation could cause creditors to question your business financial vitality.  Can you continue to pay your debts in the event of the curtailment of revenue?  What about the drop in profits after the death of a key individual?  There will be increased expense to replace the individual with a less productive person until the training process is completed.  The special abilities the former employee possessed may not even be replaceable.  All of this hits the bottom line in a negative way.

There are still other factors to consider.  This loss could disrupt management, especially if there were expert skills that were lost.  The subsequent loss could also cause key customers or employees to lose confidence in the business’ ability to perform into the future.  When customers or other employees highly depend on the special skills of an individual they will often lose that confidence, particularly in a down economy.

Life insurance written on this key person does not replace the individual.  However, it can replace the revenue lost by the business in the event of their death.  It provides cash.  Enough cash to keep the firm going in a declining revenue period and a time of increased expenses.  It provides cash to continue to pay salaries, bills and suppliers.  This will reassure everyone that the business is well capitalized to move ahead through this difficult time.  There will be costs to hire a replacement worker and train that individual.  The cash from the life insurance will cover these expenses.  Cash will be needed for stabilization of the business in a tight economy when revenues are not robust.  This cash can strengthen the credit position of the business.  This infusion of net working capital cannot be under estimated to a small business dependent on a few key persons.

Key Person life insurance is the writing of a life insurance policy on the life of the key person.  This benefit can be funded through permanent or term life insurance.  There are reasons and a place for both types of life insurance.  Determining the amount of coverage can take several forms.  Replacement cost and contributions to earnings are the principal methods to determine coverage amounts.  How each business is organized, sole proprietorship, S-Corporation or LLC etc. must also be considered before coverage is to be implemented.

The best advice is to think about this topic in relation to your business.  Seek out council from trusted advisors with experience to guide you through the thought process and putting a plan into effect.

If you’re the business owner, this overlooked protection could be your “Key” to great success!

We previously discussed a basic term life policy, but there are riders that can add important coverages to your policy. 

What is a Rider?

Riders are additional benefits that can be added to your life policy for an additional premium. Not every life insurance company offers every rider, but here are three of the most common riders and their benefits.

1. Accelerated Death Benefit

An insured person can use a portion of the death benefit (usually between 25% and 50%) if he or she is diagnosed with a terminal illness that will significantly shorten the insured’s lifespan. The total death benefit would then be decreased by the amount that is accelerated upon the insured’s death. That means, if you are diagnosed with a terminal illness, you would be able to withdraw part of your death benefit early to help you get your affairs in order, pay off loans or medical bills, or just enjoy a vacation with your family.

2. Waiver of Premium Rider

The Waiver of Premium rider waives future premiums if the insured becomes permanently disabled or loses his or her income as a result of injury or illness. Most insurance companies, impose a 6 month waiting period from the time of disability until the first premium is waived and the rider usually expires at age 65. So, you keep your policy with no further payments unless you are able to work again or the rider expires at a specified age.

3. Child Rider

This rider provides a death benefit in case a child dies before a specified age. When the child reaches the specified age, the rider can be converted to his or her own permanent life insurance policy without the need for medical exams. Note that the premium for this rider is usually the same whether you have one of ten children.

Life insurance can offer a gift of financial security to you and your family, and by adding appropriate riders to your policy, you can tailor it to meet your specific needs. Ask your life insurance professional to help you build a life policy suited to you.