Life insurance is a contract between a person and an insurance company. It can be a contract for a certain amount of time or one that lasts permanently. The temporary-esque contract is known as “term” life insurance, while the permanent contract is called “whole” or “universal” life insurance. At Anchor Wealth Management, we offer term life insurance and, occasionally, long-term care insurance because of the benefits we feel they offer in conjunction with other retirement planning strategies.
In general, a person pays a monthly premium to the insurance company in exchange for “death benefits” after the policy holder passes away. These benefits are paid to the beneficiary(ies) of the policy holder and are intended to help the living survive without the deceased’s income.
Many adults, especially those with children, have some form of life insurance. Some employers provide this type of coverage as a benefit through the company, while other people obtain life insurance on their own accord.
This blog is intended to be an overview of life insurance and how it can benefit your life.
Life insurance is intended to protect your family in the event of premature death. At Anchor Wealth Management, we like to think of life insurance as your safe harbor during a hurricane. It can provide peace of mind during uncertain times, and play a beneficial role in a strategic financial plan. But that doesn’t mean life insurance is the right product for everyone. As with all financial plans, everyone has unique goals and should consider investments accordingly.
Term Life Insurance
Term life insurance is a policy that provides coverage for a set period of time, generally a 15, 20, or 30 year set length. Many people choose a term policy because it is a standard, fixed monthly premium throughout the entire term and provides death benefits if the policy holder passes away during the term of the policy. If the policy holder dies during the term, the beneficiary will receive payments, which can be used for a variety of expenses.
Individuals often purchase term life insurance so it ends near his or her retirement age. Once the term ends, the goal is to have sufficient retirement savings to cover any necessary expenses after the individual dies. Because the payments are standard throughout the length of the policy, it allows the policy holder to set a financial plan in place that allows them to pay off debt and focus on sufficient retirement savings.
Long-Term Care Insurance
Also known as LTC or LTCI, long-term care insurance is a policy that covers medical and care costs almost anywhere, but especially where Medicare, Medicaid, and other health insurance policies do not. Most people use LTC to pay for assisted living or a nursing home later in life. It can be spent in more places than just these listed here. Most LTC policies begin to pay out when the policy holder needs help with two or more of the six activities of daily living (ADLs):
- Dressing
- Bathing
- Eating
- Toileting
- Continence
- Transferring (getting in and out of a bed or chair)
- Walking
However, long term care insurance is not typically the most pressing concern during financial planning. The Anchor Wealth Management team places more emphasis on paying off debt and setting up a plan for retirement first. We do recommend long term care insurance at the age of 60, so ask your financial advisor how to best prepare for those expenses.
Insurance can be a valuable tool to help you prepare for retirement, but it is just as important that you have a financial plan in place. If your insurance policy prevents you from paying off debt, or worse, causes you to add to your debt, you likely have the wrong policy or financial plan in place. Schedule a meeting with the Anchor Wealth Management team at our offices in Lanark or Rockford to learn more.