August 06, 2020
You may not have considered life or long-term care insurance for yourself, especially if you’re younger and the cost of end-of-life care simply isn’t your biggest concern. Planning for the inevitable end can feel a bit morbid; however, planning for this future will ensure financial security for your loved ones.
Life insurance is an important piece of any long-term financial plan. It’s designed to help your family go on without any significant financial hardship after a loss. A life insurance plan could pay off a mortgage or put the kids through college, ensuring financial security for years to come.
Another important consideration is long-term care insurance. Long-term care insurance pays for in-home care, nursing home facilities, and other forms of care you may rely on in old age that health insurance may not cover. Such care can be a major expense and while long-term care insurance may not be the right answer for you, ignoring the cost can cause your retirement plan to fall apart.
Do You Need Life or Long-Term Care Insurance?
While there’s no one-size-fits-all solution, almost anyone can benefit from coverage. You never know when life may change, and that insurance may come in handy. Younger families, who typically have fewer assets to draw on in case of a death, can particularly benefit from the security provided by life insurance. Older individuals, however, may see more benefit in a strong long-term care insurance policy, or a life insurance policy that can be tapped into to help pay for long-term care.
Do You Have Enough Life Insurance?
The value of your life insurance policy may seem huge, but those big numbers may actually not be enough. While you won’t typically aim for a policy large enough to cover your lost income after you’re gone, you do want a policy large enough to allow your family to live comfortably and without hardship.
When you’re trying to decide on a value, consider how much debt you have, what your family spends each month, and any big-ticket expenses — like buying a house or sending the kids to college — that are part of your family’s long-term plan. You will likely want a life insurance plan that will, minimally, cover all of that. But when you’re pricing out a policy, remember that most life insurance payouts are tax-free which has a big impact on the value. It is important to consult your tax advisor for specifics.
Do You Have a Plan to Pay for Long-Term Care?
Long-term care is an expense many of us will have to worry about in our lives. According to the U.S. Department of Health and Human Services on long-term care, 63% of people age 65 and up need some form of long-term care. Long-term care insurance isn’t the only way to afford it. The challenge with long-term care policies is that it’s difficult to estimate cost because you don’t know when you might need it or how long you might need it for. While your retirement savings may be enough to manage on, unexpected expenses can make insurance coverage appealing.
Keep in mind, long-term care policies can be expensive and the premiums can increase to the point that they’re no longer affordable. This can make a life insurance policy, with a long-term care rider that lets you tap into the value of your policy to pay for care, look much more appealing. Speak with a financial advisor to decide what the best solution for you is.
Are You Keeping Your Policy Up to Date?
It’s crucial to keep both your insurance company and your family informed with regards to your policy. If, for any reason, you need to change the beneficiaries on your policy, do it as soon as possible to ensure the policy information is always up to date. Similarly, make sure your family knows you have a policy and where to find the paperwork for it, which will make it easier to file a claim. With life constantly changing, you must keep your policy up to date.
Are You Keeping Up with Your Premium Payments?
Not paying your premiums can complicate matters. Your policy will either vanish entirely or never accrue the value your payments would have given it. Either way, this doesn’t help your long-term financial planning. If you find your payments are too expensive to keep up or decide you do not need as much coverage, contact your insurance agency to see what your options are. You may be able to scale back rather than losing your coverage completely.
Looking for More Help with Your Long-Term Financial Plan?
PenFed Wealth Management, available through CUSO Financial Services, Inc. (“CFS”)*, can help you figure out where the pieces fit in your financial plan — helping you to determine just what you need to help ensure your family’s financial security. Whether you’re considering getting life or long-term care insurance for the first time or just want to make sure your long-term plans are in order, we have some tips.
*Insurance products and services are offered through CUSO Financial Services, Inc. (“CFS”). Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment representatives are licensed through CFS. The credit union has contracted with CFS to make certain insurance products and services are available to credit union members.