Term Life Insurance

Term life insurance policies are typically less expensive than whole life or universal life insurance coverage. Unlike those policies, which are designed to remain in force for your entire lifetime as long as premium payments are made, term insurance is coverage that is only available for a set policy term – a predefined number of years. When you buy term insurance, you are essentially renting life insurance coverage for a short time period (up to 30 years.)

Term life policies do not have a built-in cash value account like permanent life coverage does. Instead, your entire premium payment goes to pay for the cost of insurance. Because pricing is straightforward and limited, these types of policies are generally affordable at almost any age. That’s especially true if you are in good health, and can qualify for “preferred” or “super preferred” pricing tiers.

If you would like to keep a term policy in force at the end of the initial policy term, you may have the opportunity to renew coverage. However, be aware that your premium will be increased for the renewal period, if you choose to continue the policy.

Who Should Consider Term Insurance?

Term life insurance policies work well for people who need life insurance protection for a limited time period, but who have limited funds with which to purchase coverage. For example, a young couple with a mortgage might decide to take out term life insurance policies to provide funds to pay off the mortgage, in the event one or both of them was to die prematurely. This can help ensure the survivor would be able to stay in the home without worrying about how to make monthly mortgage payments. Similarly, parents with young children may want to purchase term insurance on their own lives, to help provide funds to make up for the loss in household income that would occur if one of them died.

Benefits of Term Life Insurance Include:

• Fixed, low premium payments
• Coverage for a pre-defined policy term
• More insurance protection per dollar spent than permanent policies (at least with the initial policy term)
• Ability to customize the policy by adding riders and variations. For example, some policies may include an optional rider giving the policyholder the right to convert the policy into permanent coverage at some point in the future. Other riders available on some term policies include accelerated benefits riders for those with terminal illnesses or waiver of premium benefits that can help someone keep a term policy in force even if the policyholder becomes disabled and isn’t able to continue making premium payments.

Collateral Term Insurance

Another use for term life insurance in some circumstances is referred to as “collateral assignment” or simply “collateral insurance.” Here’s how it works:

When someone takes out a loan that isn’t secured by something else like a car or a house, the lender may require the borrower to provide some assurance that the loan will be paid back if the borrower dies while there is still an outstanding balance. That’s where term life insurance comes in. When a policy holder chooses to assign their life insurance to the lender, the lender will be paid from policy proceeds first if a death occurs during the term of the loan.

Term insurance can be an inexpensive way to provide collateral for a loan for a short period of time. While you will want to confirm tax consequences with a tax professional before choosing this approach, using a term insurance policy as collateral is generally a tax-neutral decision, because the IRS does not tax loans and insurance proceeds are generally tax-free to the recipient.

Sometimes, permanent insurance coverage best meets a customer’s needs; in other cases, those needs can be met through term insurance. It may make sense to combine term and permanent life insurance policies to protect what’s most important to you. To learn more and to explore coverage options, count on Christopher Ferguson Insurance LLC.

Annuities

Annuities are a life insurance product that can help provide a guaranteed income stream during your retirement years. While there are several different types of annuity products (discussed more below), all annuities are contractual arrangements. Most annuities have two distinct, and very different, phases.

The “accumulation phase” refers to a period of time where the owner/annuitant can deposit or invest premium dollars into the annuity, and withdraw lump sums from it. In fixed annuities, the insurance company issuing the annuity credits the policy with a fixed interest rate, and your funds grow tax-deferred. Because the earnings are not taxed, this can help you accumulate retirement savings faster.

When you “annuitize” an annuity, you turn a lump sum of money into an income stream. The period of time over which payments are made is referred to as the “annuity period.” In most cases, annuity holders have several options for choosing how frequently, and how long, they want to continue to receive payments from their annuitized contract.

Understanding Different Types of Annuities

There are many different types of annuity contracts to choose from; each insurance company that offers annuities may put their own spin on products, offering different benefits or penalties (such as surrender fees for a period of years after you start a new annuity contract.)

Some of the most common types of annuities include the following:

• Deferred Annuity – Deferred annuities have the distinct accumulation and annuity phases discussed more fully above. An annuitant could purchase a flexible premium deferred annuity at age 30 with an inheritance, and wait until age 65 to annuitize the contract. During the 35 years between purchasing and annuitizing the contract, the money invested would be credited with a guaranteed interest rate, and would grow tax-deferred. In addition, the annuity holder would also be free to make additional deposits at any time during the accumulation phase.
• Immediate Annuity – In contrast to deferred annuities, with an immediate annuity, the contract is annuitized immediately after the initial deposit (premium) is paid. The annuitant does not have the option of making additional deposits to the contract, as regular, fixed payments will begin right away based on the amount initially deposited.
• Equity Indexed Annuity – Equity indexed annuities, also sometimes referred to simply as “indexed annuities,” are riskier than fixed annuities, but less risky than variable annuities. Like fixed annuities, equity indexed annuities offer a fixed, guaranteed rate of return. This is also combined with an interest rate that is tied to a market index, such as the S&P 500 Composite Stock Price Index. This can give investors a chance to earn higher interest than what they would get in a fixed annuity, without assuming as much risk as they would have with a variable annuity product.

Annuities can also be fixed or variable. In a fixed annuity, the funds inside the contract are credited with a fixed, guaranteed interest rate. In a variable annuity, the money is invested in subaccounts that are invested in portfolios of stocks and bonds, similar to mutual funds. Variable annuity returns are not guaranteed, and there is risk of principal loss.

Why Consider Using Fixed Annuities

Fixed annuities offer many potential benefits to contract holders, including:

• Guaranteed interest rate which may be significantly higher than what is available through traditional savings vehicles
• The ability for money to accumulate and grow tax-deferred, until withdrawn in retirement
• Fixed, periodic payments from an annuitized contract can help with retirement income budgeting and expenses

Annuities may also include limitation or restrictions on the use of invested assets, at least in the early years of the contract, so it is important to understand how a particular contract works before purchasing it.

The laws governing annuity contracts are complex and subject to change. To learn more about fixed annuities and to explore whether purchasing one might help you meet your retirement goals, choose Christopher Ferguson Insurance LLC.

Disability Income Insurance

If you were to become disabled and could no longer earn an income, paying your bills and supporting your loved ones would likely be a challenge. Relying on Social Security Disability or employer-sponsored policies may mean that you don’t have the coverage you need, when you need it.

When you purchase a private disability income insurance policy through Christopher Ferguson Insurance LLC, you will have protection if you are unable to work because of a physical or mental disability. Policies can be tailored to meet your specific needs and your budget, providing you a regular monthly income for a fixed number of years or even until retirement age for qualified disabilities.

Key Person / Business Insurance

If your business depends heavily on the contributions of any specific employee or partner (including you), your business would likely suffer a heavy blow if that employee was to die unexpectedly. This is especially true for small businesses that might struggle more with finding available cash to be able to continue operations while getting someone new in position and up-to-speed.

With a key person insurance policy, the business buys a life insurance policy on the life of each key employee. The company pays the premiums to keep the policy in force, and is named as the beneficiary of the insurance proceeds. If the insured person dies, the company can use those funds in whatever way they choose. This can provide an option other than bankruptcy. The amount of coverage you purchase will be highly individual, and should be specific to your business’ anticipated needs.

No matter what type of business you have, you need insurance coverage to protect yourself, your business partners, your employees and your customers. Christopher Ferguson Insurance LLC offers a range of insurance products tailored to meet each individual business owner’s needs, goals and budget.

Long-Term Care Insurance

Long-term care insurance is coverage designed to help cover the cost of nursing home or other long-term health care needs.

Health care costs have skyrocketed in recent years; the median cost for skilled nursing home care in MA is more than $128,000/year; in NH, it’s not far behind at more than $122,000/year.  In the event you require nursing home or other long-term health care, your long-term care insurance policy would pick up covered costs up to your policy limits. This can help protect what you’ve worked a lifetime to accumulate.

Long-Term Care Annuities

Another annuity product that many clients may want to consider is a long-term care annuity. This is essentially a hybrid product, offering features of a long-term care insurance policy and annuity features.

With this type of annuity product, investors put a single lump sum into an annuity and then choose how much long-term care coverage they want, whether they want inflation coverage and how long they want that coverage to last. These choices will depend on what a particular insurance company offers, to some extent.

Money inside a long-term care annuity is free of federal income taxes when the money is used to pay for qualified long-term care expenses. And, if the annuity holder never needs long-term care, the annuity can be redeemed when it matures.

If you expect to be in a high tax bracket during retirement, buying a long-term care annuity can provide welcome relief from federal income taxes while providing insurance coverage for long-term health care without the need for a separate policy.

When Should You Buy Long-Term Care Insurance?

Many people aren’t sure when they should consider buying long-term care insurance. After all, we think of people who need nursing home care as elderly retirees. In reality, a condition requiring long-term care could arise for any of us – at any time.

The cost of long-term care insurance is based largely on your attained age and overall health status when the policy is issued. Buying long-term care insurance in your 40s and early 50s means you’ll pay less in periodic premiums, and will have the coverage you need regardless of what happens to your health later on in life.

According to the American Association of Long-Term Care Insurance (AALTCI), the best time to apply for coverage is in your mid-50s. The rationale behind that age is that for most of us, our health isn’t going to get any better at that point. Changes in your health for the worse could lead to a situation where you are ineligible for coverage. Don’t make the mistake of thinking you can wait until you need nursing home care to buy insurance; at that point, it will be too late.

For many people considering buying long-term care insurance, a big consideration is wanting to protect the assets they’ve worked a lifetime to accumulate from having to be used to pay for nursing home care. You may want to speak to an elder law attorney or estate planning attorney to discuss how long-term care coverage can help you meet your goals for protecting assets and leaving a legacy to the people or charitable organizations that are most important to you

Christopher Ferguson Insurance LLC offers various long-term care policies designed to meet different needs and goals.