Due to the current situation with COVID and the uncertainties we are facing, we thought that this would be a good time to share what we know. With 1.2M cases, a little over 73K deaths and 10 million people had filed for unemployment insurance over the past 2 weeks. Some say that unemployed in the US almost at the highest level since the depression 13%... So we agree that these are trying times financially, physically, mentally and also spiritually.
As you can imagine due to the current situation with COVID-19, there are many uncertainties being faced, because of this we thought it would be a good time to share our knowledge on life insurance. We also thought it would be a good idea to share some tips on what you should do during this pandemic.
So, where should you begin?
Here in Florida, June through November, we usually prepare for hurricane season. Since we consider this a Financial Hurricane, we recommend staying prepared at all times:
✔ Inventory: Take stock of your financial documents-life insurance, your budget, your bills
✔ Financial List: Look at what you have and what insurance protections and what you need to address.
✔ Get Your Supplies and Stock Up
✔ Always stay on Hurricane Mode.
What this pandemic has definitely taught us is that we were complacent and maybe lived on YOLO mode…and some of us were left unprepared. The good news is that it doesn’t have to be this way….moving forward….we can learn from these lessons and forge forward. It is okay, we just know better. What do we know about life insurance?
There are various types of Life Insurance, Permanent/For a Period of time/some have living benefits/some have cash value but we are not here to talk about the specifics of life insurance.
There are various types of life insurance. So, what types of life insurance are there and what do they do?
1. Permanent life insurance.
2. Term insurance.
Permanent life insurance refers to a policy that is set for your whole life, whilst term insurance has a set time-frame.
Now, we’ve covered the basics. Let's get down to the nitty-gritty stuff. So, what do you need to know about your life insurance policy?
1. Group Insurance and COBRA.
So, what is COBRA? Is it portable and affordable?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a health insurance program that allows eligible employees and their dependents continued benefits of health insurance when an employee loses their job or experiences a reduction of work hours.
So, how long does it last?
Typically, COBRA lasts for eighteen months after your final day of employment. 102% of the full cost of the health insurance premium is covered by the employers whilst the remainder comes out of the worker’s Paycheck.
Can you get life insurance through COBRA?
COBRA is not portable for life insurance, however, we recommend you get an independent life insurance policy as soon as possible.
2. Beneficiaries
When naming a life insurance beneficiary there’s a lot to consider and you’ll find it’s not as easy as you expected it to be.
So, what is a beneficiary?
A beneficiary is an individual who receives the benefit in the event of your death.
How many beneficiaries can you name?
Most people expect a beneficiary to only be named under one person however, this isn’t the case as you’re not limited to just one person. A policy's primary beneficiary is the first person who will receive the benefits if you were to pass away. It is recommended that you have a contingent beneficiary to make sure it doesn’t go to probate if something was to happen to your primary beneficiary.
Additionally, you can name an individual, trustee, non-profit, charity, or your estate!
Can you name your children as a beneficiary?
If you name a minor as a direct beneficiary of your life insurance policy or other accounts then the assets will be paid outright to your child as soon as they turn 18 or 21, depending on the state.
Providing an 18-year-old with immediate access to a large sum of money may not be in his or her best interest. We recommend that you have a living will that spells out your wishes.
So, what is a living will?
A living will allow you to guide your last wishes if you are not able to do so yourself. We have an excellent program that can get you started with your living will and all documents are created for you at a low price, click on the link below to schedule a consultation.
Be sure to update your life insurance policy when there is a change in your life for instance: if you have another child, or there is a change in your marriage.
3. Limitations to your life insurance.
As you can imagine there are some limitations to your life insurance, however, we recommend that you have your life insurance policy reviewed annually to ensure you have all the coverage you need.
Do you have group insurance?
If so, if there is a death, your employer will contact the beneficiaries and take care of the paperwork. Under some circumstances, you can lose the group coverage for instance, if you lose your job.
If you have a newly issued policy (less than 2 years) and have had the Coronavirus, then the insurance company will review your health history and determine whether or not there are inconsistencies. For example, if you have diabetes or are a smoker, but did not disclose this when you applied.
What you should know if you’re a new applicant:
✔ If you’ve had the Coronavirus, there may be a 30-day waiting period or they may postpone your coverage for 2-3 months after you've recovered.
✔ You can be charged higher premiums.
✔ Ensure you’re honest on your application. Your death benefits can be denied if you have the policy for less than 2 years and didn’t disclose that you had an illness at the time.
✔ If you haven’t paid your premiums then all benefits can be denied.
✔ You can opt for a no exam life insurance policy however, it’s costly.
✔ Your age is a definitive answer in determining whether or not you’ll be approved. The company you choose can play a crucial role when choosing if your policy is approved.
✔ Review your policy to make sure it is not a stand-alone Accidental Death & Dismemberment (AD&D) policy. If it is, it only includes coverage for accidents and it is not a life insurance policy.
4. Cash value.
So, what is cash value?
Cash value allows you to save while you are insured. You can borrow from the policy, usually at a low-interest rate, and you can pay the money you borrow back however, if you don’t it will lower your death benefit. You may also access cash from your cash value tax-free.
All life insurance policies are not built the same, there are many variations of life insurance such as final expense, whole life, whole and term life and endless variations depending on the riders you choose to add to your policy.
So, what’s the difference?
There are notable differences between whole life insurance and term life insurance.
Whole life is permanent insurance, have level premiums throughout the life of the policy and can build cash value that you can access. The premiums may be higher for whole life than for term but we liken it to owning your house rather than renting…it had many savings benefits
Term life insurance, however, is for a period 5,10,15, or 20 years and once that time period expires you can re-new but at a higher rate. You can purchase a larger face value of your policy at a lower premium but it does not have cash value and we liken it to renting a home. You have a death benefit but there are no living benefits such as accessing cash value.
There are various other variations customized depending on your budget, life stage and goals.
If you’re ready to review your life insurance, why not start now? Click here to schedule an appointment.