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Life Insurance Information
There are many kinds of life insurance, but they generally fall into two categories: term insurance and permanent insurance.
Term insurance is designed to meet temporary needs. It provides protection for a specific period of time (the "term") and generally pays a benefit only if you die during the term. This type of insurance often makes sense when you have a need for coverage that will disappear at a specific point in time. For example, you may decide that you only need coverage until your children graduate from college or a debt is paid off, such as your mortgage.
In contrast, permanent insurance provides lifelong protection. As long as you pay the premiums, and no loans, withdrawals or surrenders are taken, the full-face amount will be paid. Because it is designed to last a lifetime, permanent life insurance accumulates cash value and is priced for you to keep over a long period of time.
It's impossible to generalize about which type of life insurance is better because the kind of coverage that's right for you depends on your unique circumstances and financial goals. The best way to figure out the amount and type of life insurance that makes sense for your situation is to meet with a qualified and licensed life insurance professional.
Special Needs Trust Insurance Information
South Coast Insurance Agency is one of the few organizations guiding parents on setting up special needs trusts so their children can have a prosperous life after their guardian passes away. There is no one-size-fits-all solution. There are three components to creating a financial plan for a special needs family member.
· Legal. Working with a lawyer whose expertise is in special needs estate planning is essential. This individual will draft the legal documents that protect the child’s eligibility for government benefits while safeguarding assets that will provide quality of life and lifetime care. This is usually handled through a special needs trust.
· Income planning. Families with children who have special needs need to plan for two lifetimes of income. I call it a “three-person retirement” – income for both mom & dad’s lifetimes but also continuing for the lifetime of the child with special needs.
· Care management. Once the legal documents are in place and there is a funding strategy for the special needs trust, it’s time to choose who will take care of your child when you’re gone. Aside from other living family members, you can also look to work with organizations that provide care management. A document called a Memorandum of Intent can help outline parents’ wishes for ongoing care as well as provide information that caregivers might need to know about their son or daughter.
What are some of the common mistakes in planning for special needs children?
· Keeping too many assets in the child’s name. Parents often assume that certain educational and support services will always be available for their children with special needs, but those services often end once the child reaches 18 or 21. After that, there is usually a stringent financial needs test for certain services provided by a government agency. For SSI and Medicaid, for example, the child cannot have more than $2,000 in assets in their name. This is why it’s important to work with a lawyer to set up a special needs trust.
· Not funding the special needs trust. It’s not enough just to do the legal paperwork. You need to do the groundwork to fund the plan as well. Special needs trusts can be funded in a variety of ways, and almost any asset can go into a trust. However, it can be tricky to use tax-deferred money from something like a 401(k) plan.
· Not investing in a manner that supports two lifetimes of need. Parents can’t invest with a risk tolerance based solely on their life expectancy, because there’s another lifetime beyond theirs that needs to be accounted for. When to elect Social Security benefits is another area that requires careful planning. Having a parent start benefits at 62 may permanently reduce the lifetime disability benefits available to the child with special needs.
· Relying on term life insurance, or not getting long-term care or disability insurance. The need for life insurance will always remain, no matter how old the parents are. It’s important to choose a permanent life insurance policy over term insurance in special needs planning. A permanent policy can be a way to set aside money to fund a trust. Long-term care and disability insurance can also play a key role in financial planning for families who have a child with special needs. These vehicles have the ability to protect the parents’ lifestyles while also protecting funds set aside for the adult child.
Financial planning for families with special needs requires looking at everything from a very different vantage point. If done right, though, it can make a real difference in your loved one’s quality of life and lifetime care in the future.
Call: (844) 975-2100 | Houston (281) 975-2100 | Baton Rouge (225) 245-3100 | New Orleans (504) 569-5500
This information is for educational purposes only. Neither Michael “Bear” Norris or South Coast Insurance agency nor any of its employees, agents, or representatives provide tax or legal advice.
Disability Insurance Information
There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD):
- Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years.
- Long-Term Disability policies (LTD) have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Disability policies have two different protection features that are important to understand.
- Non-cancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
- Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.
In addition to the traditional disability policies, there are several options you should consider when purchasing a policy:
- Additional purchase options
Your insurance company gives you the right to buy additional insurance at a later time for an additional cost.
- Coordination of benefits
The amount of benefits you receive from your insurance company is dependent on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.
- Cost of living adjustment (COLA)
The COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index. You will pay a higher premium if you select the COLA.
- Residual or partial disability rider
This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.
- Return of premium
This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.
- Waiver of premium provision
This clause means that you do not have to pay premiums on the policy after you’re disabled for 90 days.
Call (844) 975-2100 for more information or a quote.