LIFE

Life Insurance is a multi-tool for every stage of life

Life Insurance and Estate Planning go hand and hand, which is a major focus for Kelley Insurance & Financial. There are many reasons to have personal life insurance coverage. The most basic personal needs for life insurance are mortgage and debt cancellation, children’s education, income replacement, family maintenance, and support. However, there are many other needs for life insurance such as Estate Planning, Wealth Transfer strategies, Charitable Giving, etc. There can also be special needs to provide for, such as having a handicapped child or other relative. Whatever the need is ‘Life Insurance’ is like no other financial instrument.

Tax-Free financial protection for your family

There is no other financial arrangement available where you can create wealth that you otherwise have not had time to accumulate. After acceptance by the company and the payment of the first premium, the people depending on you have the security in place you would want them to have should you no longer be there for them. Life insurance proceeds are also generally received income tax-free by the beneficiary. In addition, proceeds that can be paid directly to your beneficiary at death are generally free from Probate, which saves your family time, hassle, and expense. But maybe even more importantly, when life insurance proceeds are paid directly to a stated beneficiary OUTSIDE of the Probate Estate, proceeds are generally NOT subject to creditors, as other assets that are in the Probate Estate. This GUARANTEES your beneficiary(s) will have the proceeds you intended them to have.

How Much life insurance do you need?

Visit our needs calculator to determine the appropriate amount of life insurance for you and your family. Then contact us to request a quote for this valuable coverage from the industry’s most competitive and respected Life insurance carriers.

We are here to help.  Give us a call.

Kelley Insurance & Financial is your premier source for all your life insurance needs. We have many years of experience as independent brokers working for our clients, not insurance companies. We have relationships with over 50 of the most competitive life insurance carriers in the industry, to be certain you get the best deal possible on your insurance. We also specialize in Impaired Risk underwriting. We realize not everyone is a Preferred Risk and we will take the time to shop your avocation or health impairment, which our ‘dot com’ competitors will never do! Call our office today for a quote to protect your family.

What is Term Life Insurance?

Term Life has no cash value and generally provides the most coverage for the premium paid. A person purchasing a Term Life policy selects the amount of time that they want the policy to cover and the amount of money they want the death benefit to convey to their beneficiaries.  Term life policies now are available with level benefits and premiums for 5, 10, 15, 20, 25, and even 30 years. Many carriers guarantee the premiums for the entire initial term period selected, however, others do not, so please be careful when shopping plans to confirm premiums are guaranteed. 

What happens when my Term Life policy expires?

Term life policies are normally renewable after the initial level term period has expired on an annually renewable basis until some later age. However, premiums increase substantially after the initial term duration. In addition, many term life policies are convertible to a permanent policy, this feature can vary from company to company based on the terms of the policy.

Permanent Life Insurance is cost-effective over time

Permanent life insurance policies CAN level out the high cost of term life insurance in later years. This is accomplished by intentionally overpaying the cost of the insurance in early policy years, premiums that are paid in excess of the true cost of insurance cost build policy cash values. The build-up of cash value hedges against the extremely high cost of life insurance at older ages. Your cash values are credited with a competitive rate of interest that is very attractive compared to alternative safe investments, such as bank CD’s. However, unlike Bank CD’s, all interest and growth (which is not withdrawn) from a Permanent life insurance contract is tax-deferred! Use our power of tax deferral calculator to see how much more money you earn when your interest and growth is tax-deferred! Permanent life insurance cash values offer safety, asset management, and many other tax advantages.

Term Life Insurance is cost-effective for certain situations

Not all needs for life insurance are permanent, term life insurance is more suitable in many situations such as income replacement, mortgage cancelation, getting kids through college, etc. Most term life policies increase drastically in later years and are canceled as a result, however, there may still be a need for some level of life insurance to remain in effect after the term life has expired. Therefore it is important to evaluate and separate your temporary (Term) and Permanent needs for life insurance so that you have a proper allocation for each.

The Difference? Cash Value and Living Benefits

In addition, many insurance carriers have recently developed permanent life insurance policies that offer LIVING BENEFITS. These policies include ‘Accelerated Benefits’ for Long Term Care and/or Chronic Illness. These policies are designed to pay benefits not only at death but if funds are needed prior to that time for Long Term Care or Chronic Illness expenses. These policies are becoming the product of choice to fill the need for Long Term Care, as the Traditional Long Term Care insurance industry has been plagued with rate increases and a shrinking market. With a Traditional Long Term Care policy, you could pay a premium for many years and suddenly die. Unless you purchased a Traditional Long Term Care policy with a ‘Refund of Premium at Death’ rider your premiums would be lost. When you combine a Permanent Life insurance policy with Long Term Care – sometimes referred to as Hybrid policies you have the best of both worlds. If you need Long Term Care you have the funds for it, if you die your beneficiaries receive the death benefit – but in any case, someone will get the benefit of all the premiums paid into the policy – guaranteed!     

Estate Planning, Estate Tax, and Second-to-Die Life Insurance

Second-to-Die or Survivor Life insurance policies are mainly used in the area of Estate Planning and Wealth Transfer. In the area of Estate Planning, the policy is used to create liquidity for those that have exposure to the Federal and/or State Estate Tax. However, with the recent changes made by congress, the Federal Lifetime Exclusion before being subject to this tax is $5.45 Million Dollars in 2016. A married couple with properly drafted Estate Planning documents can pass on $10.9 Million dollars of assets in 2016 to their children without a Federal Estate Tax. Each State has different rules regarding the Lifetime Exclusion against the tax, these rules should be reviewed in order to be sure there is no additional tax liability to your state of residence.

What is the tax advantage of Second-to-Die Life Insurance?

In addition, with the Unlimited Marital Deduction for US Citizens, the tax is not due for married couples until the second spouse’s death. When the tax was eliminated between spouses, there was no longer any need for life insurance coverage on the first death of a spouse to pay Estate Taxes. Therefore companies developed the ‘Second-to-Die’ product because that is when the Federal Estate Tax is now due when you pass assets to your children or heirs.  Therefore this product is perfect because that is what it is designed to do, pay benefits at the second death. Therefore the pricing for this product is discounted accordingly – versus traditional individual insurance.

Does the cash value of Second-to-Die insurance grow over time?

We are also seeing this product used as a safe ‘money on money’ investment return because the internal rate of return is of course sky high in the early years. But remains above 5% for many years – with most carriers 30 years or more. With the current yield of fixed assets at all-time lows, a tax-free death benefit with a guaranteed internal rate of return in excess of 5% is very attractive!

Second-to-Die policies can protect your estate’s liquidity

Regarding Wealth Transfer, a Second to Die policy can be an excellent hedge against ordinary income taxes due on large Retirement Plan balances at death, where the taxes have not yet been paid. This is a highly efficient way to protect your heirs from the burden of inheriting your Retirement plan and the tax bill to go along with it!

In addition, a Second to Die policy is sometimes used in a two-income household with children. Especially when each spouse’s individual income is sufficient to maintain their family’s standard of living intact, however, if a simultaneous death occurred between both spouses coverage would be needed for the children. Second to Die policies can also provide a wide range of special planning solutions – such as Charitable Giving and providing for Children with special needs. 

We are here for you

Here at Kelley Insurance & Financial, we are independent brokers working for you, not insurance companies. We have relationships with over 50 insurance carriers and can design a plan that will fit your needs and be most competitive for you and your family. Please contact our office, or request a quote above in order to secure your family’s future.  

Hybrid Life Insurance: The best of both worlds

Hybrid Life Insurance policies are Traditional Life insurance policies that offer ‘Living Benefits’ for Long Term Care or a Chronic Illness. These policies have been created by insurance carriers as a direct result of a troubled traditional individual Long Term Care (LTC) insurance industry. Unfortunately, many carriers have discontinued selling Traditional LTC policies and have sold their individual LTC business to other carriers. The number of carriers that offer traditional LTC policies has decreased drastically and the few that are left have had to increase premiums for individual Long Term Care policies. 

Long Term Care in the United States is very expensive

The need for having some level of Long Term Care protection in place to hedge against poor health in our later years and protect our assets is real. Please review our Long Term Care page for more information and statistics regarding the need for long-term care. However, coming up with the right product solution is the question and it may not be the same answer for everyone – there is not a one size fits all solution. Each person’s and family’s situation is different and the need for insuring this risk needs to be analyzed accordingly.

Are Long Term Care policies worth it?

Most people are on a fixed income during their retirement years. The issue of increasing premiums for traditional LTC policies is a big concern for those trying to budget on a fixed income. Nobody wants to get double-digit premium increases over and over again in their 70’s, 80’s, and never mind 90’s. This has become a nagging issue for the traditional LTC marketplace. The other concern is “what if you die after paying years into a traditional LTC policy without needing a day of long-term care”? All the premiums paid are lost unless you include an expensive ‘Return of Premium’ Rider.

Hybrid Policies make the most out of your premiums

How about if you could purchase a life insurance policy that incorporates an LTC benefit? If you don’t need it, your heirs collect on the life insurance policy, and rates can be GUARANTEED! These hybrid policies are getting traction in the market. New policy sales are steadily rising according to LIMRA, the industry research and consulting group. By contrast, sales of new individual traditional LTC-only policies are decreasing.

With a hybrid Life/LTC you win whether you need LTC or die never needing care. If you live and need LTC care benefits are provided – however if you die never needing LTC your beneficiary will receive the policy death benefit. Someone is going to get the benefit of all the premiums you have paid into the policy. There are other hybrid policies where you win rather you live, die, or quit. These policies offer the same features as above, however, include a ‘Return of Premium’ option in early policy years.

Everybody has different protection needs.  We can help.

There is no ‘one size fits all’ solution with this type of planning, every situation is unique and needs to be evaluated on its own circumstances. In some cases some or all of a Traditional LTC policy premium can be deducted for income tax purposes, if you are self-employed or have an HSA plan – the deduction can be more attractive. If you are offering coverage to employees, work for an employer or non-profit organization offering these plans as a selective benefit – or if you are an Owner/Employee of a C-Corporation there are other tax advantages to consider.

At Kelley Insurance & Financial we are very familiar with both the traditional and hybrid LTC markets. We can navigate you to the best product solution to insure this very real risk. Please contact our office today so that we may discuss your specific situation and make recommendations for your consideration.