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Which Debt Should You Pay Off First?

August 12, 2019

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Mike Hinsvark

Mike Hinsvark

Financial Professional

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Term or Perm? Life Insurance: A Quick Review

July 15, 2019
Term or Perm? Life Insurance: A Quick Review
July 15, 2019

Navigating the world of life insurance can be a daunting task.

Even more daunting can be figuring out what policy is best for you. Let’s break down the differences between a couple of the more common life insurance policies, so you can focus on an even more daunting task – what your family’s going to have for dinner tonight!

Term Life Insurance
A Term life insurance policy covers an individual for a specific period of time – the most common term lengths being 10, 20, or 30 years. The main advantage of this type of policy is that it generally can cost the consumer less than a permanent insurance policy, because it might be shorter than a permanent policy.

There’s a small downside to term policies, and it’s found right in the name: term policy. This kind of life insurance policy does have an expiration date. While you may have the option to convert to a whole or permanent life insurance policy through a conversion rider or you may choose to extend your policy, you may find yourself needing to go through the underwriting process again. Life insurance premiums tend to rise the older you get, so the term policy premium you paid when you first got your policy at, say, 30 years old has the potential to be very different from the ones you’d pay at 50 or 60 years old.

The goal of a term policy is to pay the lowest premiums possible, because by the time the term expires, your family will no longer need the insurance. The primary thing to keep in mind is to choose a term length that covers the years you plan to work prior to retirement. This way, your family members (or beneficiaries) would be taken care of financially if something were to happen to you.

If this doesn’t sound like the right kind of policy for you, there’s another option…

Permanent Life Insurance
Contrary to term life insurance, permanent life insurance provides lifelong coverage, as long as you pay your premiums. And contrary to term life insurance, permanent life insurance can be more complex because of its many parts and therefore harder to understand and know what choices are right for you. This insurance policy – which also can be known as “universal” or “whole” – provides coverage for ongoing needs such as caring for family members, a spouse that needs coverage after retirement, or paying off any debts of the deceased.

Another great benefit a perm policy offers is cash accumulation. As premiums are paid over time, the money is allocated to an investment account from which the individual can borrow or withdraw the funds for emergencies, illness, retirement, or other unexpected needs. Because this policy provides lifelong coverage and access to cash in emergencies, most permanent policies are more expensive than term policies.

There are some key things to keep in mind if you’re considering a Cash Value Life Insurance Policy: It is important to remember that loans and withdrawals will reduce the policy value and death benefit dollar for dollar. Additionally, withdrawals are subject to partial surrender charges if they occur during a surrender charge period. Loans are made at interest. Loans may also result in the need to add additional premiums into the policy to avoid a lapse of the policy. In the event that the policy lapses, all policy surrenders and loans are considered distributions and, to the extent that the distributions exceed the premiums paid (cost basis), they are subject to taxation as ordinary income. Lastly, all references to loans assume that the contract remains in force, qualifies as life insurance and is not a modified endowment contract (MEC). Loans from a MEC will generally be taxable and, if taken prior to age 59½, may be subject to a 10% tax penalty.

And don’t worry too much about the hard to understand parts. A financial professional can give you an idea of what a well-tailored permanent life insurance policy may look like for you and your unique situation.

How Much Does the Average Consumer Need?
Unless you have millions of dollars in assets and make over $250,000 a year, most of your insurance coverage needs may be met through a simple term policy. However, if you have a child that needs ongoing care due to illness or disability, if you need coverage for your retirement, or if you anticipate needing to cover emergency expenses, it may be in your best interest to purchase a permanent life insurance policy.

No matter where you are in life, you should consider purchasing some life insurance coverage. Many employers will actually offer this policy as part of their benefits package. If you are lucky enough to work for an employer who does this, take advantage of it, but be sure to examine the policy closely to make sure you’re getting the right amount of coverage. If you don’t work for a company that offers life insurance, don’t worry, you still may be able to get great coverage at a relatively inexpensive rate. Just make sure to do your research, consider your options, and make an informed decision for you and your family.

Now, what’s it going to be? Order a pizza or make breakfast for dinner? Choices, choices…

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Who Can Be My Life Insurance Beneficiary?

Who Can Be My Life Insurance Beneficiary?

Do you have a recipient in mind for the proceeds of your life insurance policy?

Many people have someone in mind before they purchase their policy. This person or entity can be named as your beneficiary. Naming your life insurance beneficiary helps to ensure that the party you choose gets the proceeds of your life insurance policy, even if your will leaves your estate to someone else. If you’ve decided that you want to provide for a special person or organization through your life insurance policy, it’s important that the beneficiary section will do what you expect.

Here are some simple tips that can help point you in the right direction:

Choosing Your Life Insurance Beneficiary
Who you name as your beneficiary is a deeply personal decision, and there’s no right or wrong answer. Here are some areas to consider:

  • Family: Spouses, children, siblings, and parents are all very common choices as life insurance beneficiaries. However, children under the age of 18 are a special case. Life insurance companies won’t pay a death benefit to a minor, so you may want to set up a trust or choose a responsible adult whom you trust with the welfare of your child.
  • Legal guardian: If your life insurance policy does name a minor as your beneficiary, your insurer may require that you designate a legal guardian.
  • Estate: Your estate can also be the beneficiary of a life insurance policy. The proceeds of your life insurance policy would be paid to the executor of your estate. Choosing your estate as a beneficiary also requires that you’ve drafted a last will and testament and that you haven’t named a specific person as a beneficiary on your policy. There may also be tax ramifications and other considerations that can affect this choice, so talk this one over with an expert first.
  • Trusts: You can name a trust as your life insurance beneficiary. However, the trust must exist before the policy goes into force.
  • Charity: Charities can absolutely be named as life insurance beneficiaries.
  • Business / Key Person Life Insurance: In business partnerships, other partners can be a named beneficiary. Businesses also sometimes insure the life of a key employee with the business as the beneficiary.
  • Friends, etc: You can also name a friend as a beneficiary – assuming your friend isn’t a minor.

Note: Contrary to popular belief, you can’t name a pet as your beneficiary — but you can name someone you’d trust to care for your pet. (Sorry, Fluffy.)

Multiple Beneficiaries and Contingent Beneficiaries
You can name multiple beneficiaries for your life insurance policy, but when doing this, it’s better to use percentages rather than fixed dollar amounts. For permanent life insurance policies, like whole life insurance and universal life insurance, the death benefit payout amount can change over time, making percentages a better strategy for multiple beneficiaries.

You can also name contingent beneficiaries. Think of a contingent beneficiary as a back-up beneficiary. In the event that your primary beneficiary passes before you do (or at the same time), the proceeds of your policy would then go to the contingent beneficiary.

Final Thoughts
Avoid using general designations, such as “spouse” or “children” as your beneficiary. Spouses can change, as divorce statistics remind us, and you never know which long-lost “children” might appear if there’s a chance of a payday from your life insurance policy. In the very best case, general designations will cause delays in payment to your intended beneficiaries.

Choosing a life insurance beneficiary isn’t necessarily complicated, but there’s some room for error in certain situations. While the decision is always yours to make, it’s best to discuss your options with your financial professional to help make sure the settlement goes smoothly and your wishes are honored.

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Why you need an insurance review

February 20, 2019
Why you need an insurance review
February 20, 2019

Insurance is intended to protect your assets and to help cover certain risks.

Policies may have standardized language, but each insurance policy should be tailored to your needs at the time the policy is written.

A lot can change in a short amount of time – so an annual insurance review is a good habit to develop to help ensure your coverage still addresses your needs.

Life changes, and then changes again, and again
There are some obvious reasons to review your life insurance coverage, like if you’re getting married or having a baby – but there are also some less obvious reasons that may change your coverage requirements, like changing jobs or experiencing a significant change in income.

Here are some of the reasons you might consider adjusting your coverage:

  • You got married
  • You got divorced
  • You started a family
  • Your income changed
  • Your health improved
  • You lost weight or quit smoking
  • You bought a house
  • You paid off your house
  • You started a business
  • You borrowed money
  • You retired

Depending on what has changed, it may be time to increase your coverage, supplement coverage with another policy, change to a different type of policy, or begin to move some money into savings or update your retirement strategy.

Have you updated your beneficiaries?
Did you get married or divorced? Did you start a family? It’s time to update your beneficiaries. Life can change quickly. One thing that can happen is that policyholders may forget to update the beneficiaries for their policies. A beneficiary is the person or persons who will receive the death benefit from your life insurance policy. If there is a life insurance claim, the insurance company must follow the instructions you give when you assign beneficiaries – even if your intent may have been that someone else should be the beneficiary now. Fortunately, this can be remedied.

How long has it been since you first set up a policy? How long has it been since your last insurance review? What has changed in your life since the last time you reviewed your policies?

Your insurance needs have probably changed as well, so now is the time to make sure you have the coverage you need.

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Travel Insurance: What to know before you go

December 5, 2018
Travel Insurance: What to know before you go
December 5, 2018

Postcard-worthy sunsets. Fascinating cultures and customs. Exotic people and maybe a new language to learn.

At least enough to order food, pay for souvenirs, and find the nearest bathroom.

Travel can leave us with amazing memories and cause us to grow simply by being exposed to different ways of seeing the world. However, going far from home can be fraught with peril – much of which we may not consider when daydreaming about our trip. Travel insurance has the potential to provide protection if the daydream turns into a nightmare in a number of ways.[i]

An auto or life insurance policy is designed to provide a limited set of coverages, making the policies fairly easy to understand. Travel insurance, by comparison, can cover a wide range of unrelated risks, making the coverage and its exclusions a bit more difficult to follow. Depending on your travel insurance provider, your travel insurance may cover just a few risks or a wide gamut of potential mishaps.

So how do you know what kind of travel insurance you should purchase? Read on…

Trip Cancellation Insurance
One of the most basic and most commonly available coverage options, trip cancellation insurance can provide coverage to reimburse you if you are unable to take your trip due to a number of possible reasons, including sickness or a death in the family. Cancellations for reasons such as a cruise line going bust or your tour operator going out of business may also be covered. Additionally, if you or a member of your party becomes ill during the trip, trip cancellation insurance may reimburse you for the unused portion of the trip. Some trips you book will allow cancellation with full reimbursement (within a certain timeframe) for any reason, whereas some trips only allow reimbursement for medical or other specific reasons – make sure you check the travel policy for any limitations before you purchase it.

Baggage Insurance
Your travel daydreams probably don’t include lost baggage or theft of personal items while abroad – but it happens to travelers every day. Baggage insurance is another common coverage found bundled with travel insurance that provides protection for your belongings while traveling. If you already have a homeowners insurance or renters insurance policy, it’s likely that you already have this coverage in place. As a caveat, homeowners insurance and renters insurance policies typically limit the coverage for certain types of items, like jewelry, and may only pay a reduced amount for other items. Home insurance policies also have a deductible that should be considered when deciding if you should purchase baggage insurance with your travel insurance.

Emergency Medical Coverage
Many people aren’t sure if their health insurance will cover them internationally – you may want to check if your policy protects you outside of the country. Accidents, illness, and other conditions that require medical assistance are border-blind and can happen anywhere, which may leave you scrambling to arrange and pay for medical attention that could be needed by you or your family. Travel health insurance can cover you in these instances and is often available as a stand-alone policy or bundled as part of a travel insurance package.

Accidental Death Coverage
Often bundled as a tag-along coverage with travel health insurance, accidental death coverage provides a limited benefit for accidental death while traveling. If you already have a life insurance policy, accidental death coverage may not be needed. Check your current policy to see if you have fewer limitations and if it provide a higher death benefit for your named beneficiaries or loved ones before you buy additional coverage.

Other Travel Coverages
A number of other options are often offered as part of travel insurance packages, including missed connection coverage, travel delay coverage, and traveler assistance. Another coverage option to consider is collision and comprehensive coverage for rented cars. Car accidents are among the leading types of mishaps when traveling. A personal car insurance policy may not cover you for vehicle damage, liability, or medical expenses when traveling abroad.

When you’re ready to cross the Seven Wonders of the Modern World off your bucket list, consider travel insurance. It may provide some relief so you can concentrate on the important things, like making sure you bring the right foreign plug adapter for your hair dryer.

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[i] https://www.iii.org/article/should-you-buy-travel-insurance

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3 More "I Dos" for Newlyweds

3 More "I Dos" for Newlyweds

Congratulations, newlyweds!

“To have and to hold, from this day forward…”   At a time like this, there are 3 more “I dos” for you to consider:

1. Do you have life insurance?
Any discussion about life insurance is going to start with this question, so let’s get it out of the way! As invigorated as people feel after finding the love of their life…let’s face it – they’re not invincible. The benefits of life insurance include protecting against loss of income, covering funeral expenses, gaining potential tax advantages, and having early access to money. Many of these benefits can depend on what kind of life insurance you have. Bottom line: having life insurance is a great way to show your love for years to come – for better OR worse.*

2. Do you have the right type and amount of life insurance?
Life insurance policies are not “one size fits all.” There are different types of policies with different kinds of coverage, benefits, and uses. Having the right policy with adequate coverage is the key to protecting your new spouse in the event of a traumatic event – not just loss of life. Adequate life insurance coverage can help keep you and your spouse afloat in the case of an unexpected disabling injury, or if you’re in need of long term care. Your life with your spouse isn’t going to be one size fits all, and your life insurance policy won’t be either – for richer or poorer.

3. Do you have the right beneficiaries listed on your policy?
This question is particularly important if you had an existing policy before marriage. Most newlyweds opt for listing each other as their primary beneficiary, and with good reason: listing the correct beneficiary will help ensure that any insurance payout will get delivered to them– in sickness and in health.   If you couldn’t say “I do” to any or all of these questions, contact me. It would be my pleasure to assist you newlyweds – or not-so-newlyweds – with a whole NEW way to care for each other: tailored life insurance coverage – ’til death do you part!

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*Tax and/or legal advice not offered by World Financial Group, Inc. or their affiliated companies. Please consult with your personal tax professional or legal advisor for further guidance on tax or legal matters.

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Life Insurance: Before or After Baby?

Life Insurance: Before or After Baby?

Many people get life insurance after one of life’s big milestones:

  • Getting married
  • Buying a house
  • Loss of a loved one
  • The birth of a baby

And while you can get life insurance after your baby is born or even while the baby is in utero (depending on the provider), the best practice is to go ahead and get life insurance before you begin having children, before they’re even a twinkle in their mother’s eye.

A reason to go ahead and get life insurance before a new addition to the family?

Pregnancies can cause complications for the mother – for both her own health and the initial medical exam for a policy. Red flags for insurance providers include:

  • Preeclampsia (occurs in 5-10% of all pregnancies)
  • Gestational Diabetes Mellitus (affects 9.2% of women)
  • High cholesterol (rises during pregnancy and breastfeeding)
  • A C-section (accounts for 32% of all deliveries)

Also, the advantage of youth is a great reason to go ahead and get life insurance – for both the mother and father.

The younger and healthier you are, the easier it is for you to get life insurance with lower premiums. It’s a great way to prepare for a baby: establishing a policy that will keep them shielded from the financial burden of an unexpected and traumatic life event.

Whether you’re a new parent or beginning to consider an addition to your family, contact me today, and we can discuss your options for opening a policy with enough coverage for a soon-to-be-growing family or updating your current one to include your new family member as a beneficiary.

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Getting Your Reindeer In a Row

Getting Your Reindeer In a Row

Dasher. Dancer. Prancer. Vixen. Comet. Cupid. Donner. Blitzen. (And Rudolph too, of course.)

This is a holiday roll-call that’s instantly recognizable: the reindeer that pull Santa’s magical sleigh. But what if things got so hectic at the North Pole (not a stretch when you’re in charge of delivering presents to every child on Earth), that when it was time to hitch up the reindeer on Christmas Eve, they were all out of order?

Prancer. Cupid. Dasher. Comet. Dancer. Vixen. Blitzen. Donner.

Hmmm, someone’s missing…. what happened to Rudolph? (Looks like he got left behind at the North Pole. In all the hubbub one of Santa’s elves forgot to review the pre-flight checklist.)

Since so much can change during the year from one crazy “Happy Holidays!” to the next, your ducks – or reindeer, that is – may not even be in a row at this point. They could be frolicking unattended in a field somewhere! And who knows where your Rudolph even is.

We can help with that. An annual review of your financial strategy is key to keeping you on track for your unique goals. Lots of things can change over the course of a year, and your strategy could need some reorganizing. I mean, did you hear about everything that changed for Prancer? (What do you call a baby reindeer, anyway?)

Here are some important questions to consider at least once each year (or even more often):

1. Are you on track to meet your savings goals? A well-prepared retirement is a worthy goal. Let’s make sure nothing drove you too far off track this year, and if it did, let’s explore what can be done to get you back on the right path.

2. Do you have the potential for new savings? Did your health improve this year? Did that black mark on your driving record expire? Changes like these have the potential to positively impact your life insurance rate, but we’d need to dig in and find out what kinds of savings might be in store for you.

3. Have your coverage needs increased? Marriage, having a child, or buying a home are all instances in which your life insurance coverage probably should be increased. Have any of these occurred for you over the last year? Have you added the new family member as a beneficiary?

If you haven’t had a chance to review your strategy this year, we can fit one in before Santa shimmies down the chimney. Which of your reindeer do you need to wrangle back into the ranks before 2018 gets going?

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3 Ways to Give Thanks for Loved Ones

3 Ways to Give Thanks for Loved Ones

Just saying “thanks” without giving a little thanks back tends to lose its charm when we start to lose our first teeth.

When we’re young, it seems like our parents and older siblings are just relieved that we’re learning some manners to offset our little legs swinging wildly off the chair under the dinner table, narrowly missing people’s shins. (Hey, it’s hard to sit still at big family meals when you’re that little!) All the grown up talk about far away jobs or how much you’ve grown wasn’t as stimulating as the tooth that had started to wiggle ever so slightly when you bit into some turkey… But at least you remembered to say thank you when someone passed the cranberry sauce!

As we got older, though, those conversations became easier to participate in as we shared our own stories, watched our extended family grow and mature, and then tried to wrangle our own kids into saying “thank you” when they were given a gift by a relative they hadn’t seen in a year.

The biggest lesson we learn about being thankful as we get older? It’s important to show the people we love how thankful we are for them – not just say it. We learn more about the responsibility we have to take care of the people we are thankful for. And at this time of year, we can give our thanks to them by making sure they are financially prepared if we suddenly aren’t around anymore.

Here are 3 ways you can give thanks for your loved ones:

1. Consider getting life insurance. Replacing lost income, covering funeral expenses, gaining potential tax advantages, having early access to money – these benefits of life insurance will give your loved ones a bit of financial stability and let them know how thankful you were for them. However, many of these benefits can depend on what type of life insurance you have, so taking the time to find the right type and amount of insurance for your particular needs and goals is important. Which leads us to the second way to give thanks…

2. Get the right type and amount of life insurance. Life insurance policies are not “one size fits all,” so investing your energy into this step is a key way to give thanks for your loved ones. Different types of policies have different kinds of coverage, benefits, and uses. Having the right policy with adequate coverage is the key to protecting your loved ones in the event of a traumatic event – not just the loss of life. Adequate life insurance coverage can help keep you and your loved ones afloat in the case of an unexpected disabling injury, or if you’re in need of long term care. Your life with your loved ones isn’t going to be one size fits all, and your life insurance policy won’t be either.

3. List the right beneficiaries on your policy. This question is particularly important if you haven’t looked at or updated your beneficiaries in a while. Why? Because listing the correct beneficiary will help ensure that any insurance payout will get delivered to the them. You may need to review your policy’s beneficiaries if you have recently married or divorced, had kids, or maybe even met with a cousin over the holidays who you’d like to leave a little something to!

If you can’t say that the 3 ways above are how you’re going to give thanks for your loved ones this year, give me a call. I’d like to give my thanks to you by assisting you with a whole new way to say “thank you” – tailored life insurance!

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She Got the House… AND the Life Insurance Policy?

October 2, 2017
She Got the House… AND the Life Insurance Policy?
October 2, 2017

Life insurance is great for protecting your spouse… as long as it’s for your current one.

This Forbes article tells the story of Warren Hillman, a man with a life insurance policy, a wife, and an ex-wife.

Now, I don’t know if the former Mrs. Hillman “got the house” in her divorce from Warren – I’m being cheeky – but she definitely got the life insurance policy payout! When Warren died from a rare form of leukemia, the entire amount of $124,558.03 was given to Judy, the former Mrs. Hillman. Warren’s widow Maretta got nothing.

Why? When Warren remarried, he never changed the beneficiary designation on his life insurance policy.

Maretta and Judy fought over that money in court for years. The case went all the way to the Supreme Court. And the justices ruled in Judy’s favor. She, the ex-wife, was entitled to the entire payout.

All that time and money wasted on legal battles could have been avoided by changing a name on a form! Speaking of which… When’s the last time you reviewed your own life insurance policy? After reading this, you may already be scrambling through your files to find it!

Let’s check up on your policy together. Contact me today, and we can get the ball rolling on:

  • Reviewing (or revising!) your list of beneficiaries.
  • Making sure you have the coverage you want.
  • Discussing the life insurance features you might have that you can use now.
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