FAQs & LibraryThis page contains a variety of resources useful to your insurance needs. The first scroll area contains answers to frequently asked questions (FAQs) about Life Insurance, Health Insurance, Senior Insurance and Medicare. The second scroll area contains listings of library documents you can download by clicking on their titles. |
| Frequently Asked Questions (FAQs): |
Life InsuranceHealth InsuranceLong Term Care InsuranceMedicareAnnuitiesLife InsuranceWhat is Life Insurance? Life insurance is a legal agreement between you and the Insurance Company to secure your Family's future in case of your untimely demise. It provides with a pre-determined amount to the beneficiary during the contract period. The primary purpose of Life Insurance is the protection of your entire family in case of your death. Now a day's Life insurance also acts as a tool to plan effectively about your future Savings, your child's education needs etc. So apart from covering your life, it is an effective tool to augment your wealth. The amount of the premiums generally depends on factors such as your age, gender, occupation, medical history and whether you intend to build up cash value in your policy. Some policies may require a medical exam. Certain types of life insurance may also provide benefits for you and your family while you're still living. Such policies accumulate cash value on a tax-deferred basis that can be used for future needs such as supplementing your retirement income or helping provide for a child's education. Who is a beneficiary? Beneficiary is the person or party who will be paid off any benefits through your Life Insurance policy. Life insurance can be personal or purchased for a business purpose. What is Term Life Insurance? Term life insurance is the least expensive type of coverage, at least initially, and the simplest. These policies do not build up a cash value. Coverage is in effect for a fixed term or period of time - usually one to 20 years - and usually can be renewed. The policy pays your beneficiary a fixed amount of money if you die during the term of the policy. The premiums are lowest when you are young and increase upon renewal as you age. Be sure to check your policy for age or other renewal restrictions. What is Whole Life Insurance? Whole life insurance provides protection as well as a cash value. The premiums remain at a fixed level for the duration of the contract. Over time, the policy generally builds up cash value on a tax-deferred basis. Many companies pay policyholders a dividend. Dividends provide both flexibility and increased value to your life insurance policy. They can add more coverage to your overall insurance benefit and can build a sizable cash value. You may prefer this type of coverage since the cash value can benefit you while you're still alive. You can use it to supplement retirement funds or help provide for a child's education - it's your money to use as you need. You should, however, keep in mind that life insurance should not be purchased solely for accumulation. Its primary purpose is protection. Also, withdrawals and/or loans will decrease the death benefit. What is Universal Life Insurance? Universal life insurance is a flexible life insurance plan. These policies are interest-sensitive and permit the owner to adjust the death benefit and/or premium payments, within limits, to fit the owner's situation. Your net premium payments are applied to the accumulation fund, which earns a guaranteed interest rate. The monthly cost of the death benefit and policy administration is deducted from the accumulation fund. As with whole life insurance, the cash value is yours -- you may withdraw it or borrow against it at any time. Read your policy carefully to understand how withdrawals may affect the death benefits. Since you decide how much premium to pay, within limits, some universal life policies even allow you to skip payments. If you skip a premium payment, the administrative and death benefit costs are deducted from your cash value. The policy stays in effect until your cash value can no longer cover these costs. Make sure you understand your annual statement so you know how much interest your policy is earning and how much cash value you have. Universal life insurance rates are subject to change, but the rate will never fall below the minimum rate guaranteed in the contract. What is Variable Life Insurance? Variable life insurance is for those who want to tie their life insurance policy to the performance of the financial markets. You decide how your net policy values are to be invested. Your cash value may have the opportunity to accumulate more rapidly than with other cash value policies, but you incur additional risk. If market performance is poor, your death benefit may decrease, and you may have to pay higher premiums to keep the policy in effect. As with whole and universal life policies, you may borrow against or withdraw the cash value at anytime. Keep in mind that loans and withdrawals may reduce cash values and the death benefit. Read your policy carefully for any possible charges associated with these transactions. These policies are sold by prospectus, a valuable disclosure document, that you should also read carefully. Do I need life insurance? The ability to earn an income can be considered your family's most valuable asset because your income allows you to obtain other assets, particularly the necessities of life and, of course, the creature comforts. However, as we know, the ability to earn an income is not guaranteed. Yet, the need for income may continue for those who were financially dependent upon you. Consequently, your need for life insurance and the amount will depend upon your personal and financial circumstances. How much life insurance do I need? Most financial planners recommend 6 to 8 times your annual earnings. However, there are other considerations when determining how much life insurance you need. For instance, what other income do you have beyond your current salary? What are your spouse's current or potential earnings? How many are financially dependent on you? Will you have death benefits from an employer-sponsored life insurance plan? Are there other large expenses such as a mortgage, college or wedding fund? A family needs analysis can help you determine how much life insurance is appropriate at the stages of your life. Should I buy term insurance or cash value life insurance? First answer this question - are you able to purchase enough life insurance coverage? The amount of life insurance you need may be so large that the only way you can afford it is to buy term insurance, which carries a lower premium than cash value policies. Most people are tragically under insured, so don't ever buy (more expensive) cash value insurance, if it means you can't buy the coverage you need. People with a need to reduce estate taxes often use cash value life insurance as a tool. If you have further questions, please ask your financial advisor. Should I buy life insurance for my spouse or children? You must first protect the earnings of the primary breadwinner before considering life insurance on your spouse or children. If your spouse works, then you should purchase insurance to protect the spouse's earnings as well. If you buy life insurance for your children, you should only do it with discretionary funds. Protect your earnings first. Should I buy mortgage insurance? With mortgage insurance, the face amount decreases over time in step with the projected decrease in the mortgage balance. Although the death benefit decreases, the premium is usually level in amount. While it seems like a convenient option, the dollar cost per $1,000 of coverage is usually higher than just straight term insurance. Decreasing term life insurance in this day and age may be inappropriate -- for example when mortgages are refinanced or second or third mortgages are attached to a property. In such cases level term life insurance policies may be the most appropriate type of policy. Should I buy mortgage insurance? With mortgage insurance, the face amount decreases over time in step with the projected decrease in the mortgage balance. Although the death benefit decreases, the premium is usually level in amount. While it seems like a convenient option, the dollar cost per $1,000 of coverage is usually higher than just straight term insurance. Decreasing term life insurance in this day and age may be inappropriate -- for example when mortgages are refinanced or second or third mortgages are attached to a property. In such cases level term life insurance policies may be the most appropriate type of policy. What if your insurance company goes bankrupt? Established by law in every state, guaranty funds are typically maintained by a state's commissioner of insurance to protect policyholders in the event that an insurer becomes insolvent or otherwise unable to meet its financial obligations. The funds are usually financed by assessments against all property and casualty insurers regulated by state. Are life insurance benefits taxable? Death benefits are usually not subject to federal income tax. There are exceptions, though, if the IRS deems your insurance policy to be an investment in disguise. Your insurance agent should be able to tell you if your policy benefits will be taxable. What is Surrender Value? It is that value which is payable by the insurer whenever he desires to terminate the contract before the expiry of the Policy term. The insured can surrender the policy if the policy is kept in force for 3 years and Bonus is also added to that value if the policy has been there for at least 5 years. When is policy lapsed? The Policy lapses, when you don't pay the premium within the grace period provided after the due date. What is a Death Claim? It is the claim payable at the time of death to the nominee or any legal successor, if no person is nominated by the insured or no will is made, the claim is paid to the holder of a Succession Certificate. Still have questions? Click here or call 303.912.5090Health InsuranceDo I need health insurance? Health insurance, like other types of insurance, is the mechanism you use to pay for, in this case, the costs of your health care. The decision to purchase health insurance is based on your perceived need for this type of risk coverage, although there is much discussion in the national healthcare reform debate about mandating coverage, much as you are required to have auto insurance. Why are premiums so high? Premiums are computed on the contract you chose, but are also based on the anticipated average costs of care for someone your age. Insurance premiums reflect the costs of care, so as medical inflation increases costs, premiums rise as well. How can I reduce the premiums I pay? The premium charges for health insurance are calculated on the amount of costs you are willing to pay versus the costs you want the insurance carrier to pay for these costs. If you can reasonably take on a greater share of costs, then you should be able to get a lower premium. Are there different types of health insurance? In fact, there are. Health insurance can be sponsored by an employer, and can fall into small or large groups (1-50, in Colorado, versus over 50). Individual health insurance can be sold to individuals and their families. In Colorado, we have a high risk pool for people who have difficulty qualifying for individual coverage. In addition, government provides health care assistance in a number of ways, the most notable of which are Medicare (over 65 insurance), and Medicaid (income qualification). What is COBRA? When you have worked for an employer with over 20 employees who sponsors a health insurance plan for the employees, if you have been covered by the plan for a single day, you can pay to retain that same coverage for up to 18 months following your termination. COBRA is not an insurance plan, rather it is a process by which you can retain your prior employer-sponsored coverage. In order to do this, you, generally through a third party, repay your former employer for the insurance premium. COBRA premiums include a 2% additional cost over the total cost of the premium that the employer pays for the coverage you have selected. In Colorado, as many states, a similar right exists under State Continuation regulations that apply to former employees of companies that have fewer than 20 employees. In Colorado, a notable difference is that in order to qualify for State Continuation, a former employee has to have been covered by the employer-sponsored health plan for 6 months. What is an agent or broker? In general, an agent works for a single insurance company. A broker offers plans from multiple companies, and is an independent business person. Brokers earn their living by being paid commissions by the insurance companies on the plans that they place for people, and there is no charge to the applicant. Law specifies that there can be no difference in policy price whether a broker is used or not, and furthermore, anti-rebating laws prohibit brokers from offering incentives to applicants in order to purchase from them (ie. discounting premiums). Still have questions? Click here or call 303.912.5090Long Term Care InsuranceWhat is long term care? Long term care is any type of care that a person needs whether at home or in a facility such as a nursing home or an assisted living community. What is long term care insurance? Long term care insurance covers a person against the costs of home health care, community-based care (assisted living, etc) and of course nursing home care. It works in conjunction with Medicare or private health insurance. Why are most people unprepared for the cost of an average long term care stay? The average stay in a extended care facility is 2-3 years. The average cost is about $4000/mo. Fewer than 20% of those that need long term care are able to cover the cost from their personal assets. The reality is that most people cannot save enough. What are the options? Ask yourself the following:
Will Medicare cover me? First of all, Medicare has a limited benefit for skilled nursing facility care, following a hospital stay of at least 72 years. The SNF benefit is for recuperative care, not custodial care. For those that qualify, Medicare will pay up to 100 days of LTC. Again, the Medicare SNF benefit is NOT custodial. What are the odds that a person will need LTC? According to a recent study published in the New England Journal of Medicine: The chance of needing some form of extended care is about 40% for people over the age of 65. This care may be in a facility or in the home. Can everyone qualify for LTC insurance? Long term care insurance is medically underwritten, and is not guaranteed. This suggests that people should acquire LTCi at a younger age, when they are relatively healthy, which also means that the premiums will be less than if acquired at an older age. Long term care costs are high today -- will they continue to go up? Obviously this can't be known for sure, but since the population is aging rapidly, it stands to reason that as demands grows, costs will also increase. Fortunately, most LTCi policies contain provisions for annual benefit inflation, which if properly selected, can track inflation effectively. Still have questions? Click here or call 303.912.5090MedicareWhat is Medicare? Medicare is health insurance for people age 65 or older, under age 65 with certain disabilities, and any age with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant). Medicare recipients are termed beneficiaries. How do I know if I'm eligible? In general, if you have worked and paid payroll taxes for 40 quarters, the same eligibility criteria for Social Security, and you are turning 65, you will receive Part A Medicare from the federal government for free. You can also purchase Part B at this time. Your eligibility will be the first of the month of your 65th birthday, unless you were born on the first, in which case you become eligible on the first of the preceding month. People who are under age 65, and have been receiving SSDI for 24 months are eligible to receive Medicare. In the instance where you continue to work and are covered by a group health plan, you automatically become enrolled in Part A at age 65, but your eligibility to enroll in Parts B or D is abated until your group coverage is terminated. How Do I Get Medicare? You need to visit a nearby Social Security office to enroll in Medicare, no more than 90 days prior to your eligibility. While you can call Social Security and request enrollment documents, or even pursue an online enrollment option, the office visit is generally more timely. How is Medicare Structured? Medicare has four parts: Part A is commonly called Hospital insurance and provides for inpatient care, as well as other services. If you are Medicare-eligible, there is no cost for participation in Part A; Part B is called Medical insurance and covers doctors office visits and other outpatient care. Participation in Part B of Medicare is optional, carries a monthly premium, and is income means tested. If you do not enroll in Part B when you are eligible, Medicare may impose a 10% annualized premium penalty at the time you do enroll. It is important to note that there are situations, other than turning 65, which may delay the qualifying event for Part B eligibility. One of those would be continuing to be covered on a group health plan; Part C of Medicare provides for Medicare Advantage plans. MA plans, as they are termed, are offered by a commercial insurance company, or carrier, and provide at least the same level of coverage as does original Medicare. Most often MA plans also include significant additional coverages as well, including in many cases, prescription drug coverage. Premiums, in addition to the Part B premium, may be charged for MA plans by the carriers; Part D of Medicare provides help covering outpatient prescription drug coverage, and is provided through commercial carriers. Medicare stipulates minimum coverages, and most often available plans offer benefits above the minimums. Premiums for these plans vary based on benefit level from the various carriers. In addition, Part D imposes a 1%/month penalty if a beneficiary doesn't enroll in Part D when eligible. What are my enrollment options? Enrollment in Part B is mandatory to have either a Part C or Part D plan, or to apply for a Medicare Supplement plan. A beneficiary can elect to enroll in Part A only, parts A and B only, Parts A and B with a Medicare Supplement plan (also known as Medigap), or Parts A and B through a Medicare Advantage plan. Part D coverage is also available. Original Medicare allows the beneficiary to see any doctor/provider that agrees to accept Medicare. Medicare Advantage plans may be network plans, or have specific requirements for provider acceptance. What is a Medicare Supplement Plan? Medicare does not pay 100% of the costs of care. Some of the costs are paid by the member, and in fact, Medicare reimbursement rates and approved charges can vary. Medicare Supplement plans are private insurance plans designed to cover the gaps in Medicare payments. Standardized plans, enumerated from A - L, are available from several carriers. Each has different benefit levels, but regardless of which carrier offers particular plans, the benefit levels are the same for each corresponding plan. Only the premiums vary. Medicare Supplement plans do not include outpatient prescription drug coverage, so enrollment in Part D is required to obtain outpatient drug benefits. Medicare Supplements are guaranteed renewable, meaning the plan stays in force as long as the premium is being paid. What Types of Medicare Advantage Plans Are Available? MA plans can take one of several forms, depending on what individual carriers wish to offer. MA plans are offered based on service areas (county by county, in most instances). It is therefore important to check to insure that the desired coverage is offered in the area where you live. Familiar plan designs, such as HMO and PPO are available, both of which use networked providers. Doctors on these networks have agreed to see Medicare clients. An innovation with the 2003 Medicare Modernization Act was the Private Fee for Service plan, or PFFS. This allows a Medicare beneficiary to go see any doctor/provider as long as that provider agrees to accept Medicare assignment and the carrier's terms of payment. Recent actions by the Congress may affect the availability of such plans after 2010. Another MA plan type is the Medical Savings Account plan. This plan features, for 2008, the deposit of $1300 into the beneficiary's MSA account. The plan is a single deductible, major medical plan. The amounts in the MSA account can be used to pay medical bills, and the beneficiary is responsible for any other payments up to the amount of the deductible. Once the deductible is met, the plan pays 100% of Medicare approved medical costs. Outpatient prescription drugs are not included in the MSA plan designs, but can be added separately. MA plans typically have no or low additional premiums. The beneficiary must continue to pay the Part B premium, as well as the MA premium, if any. When Can I Apply for Coverage? Medicare Supplement plans can be applied for at any time during the 6 months prior to becoming eligible and 6 months after. Acceptance is guaranteed in this window. In addition, a carrier will take applications outside of this window of guaranteed acceptance, but will medically underwrite the application. MA plans can be applied for during a variety of time periods. The most common are the Initial Election Period, which begins 3 months prior to your 65th birthday, the month of your birthday, and 3 months after. Each year , between November 15th and December 31st, you can also apply for a plan, or change plans -- this is the Annual Election Period. An Open Enrollment Period is available from January 1 - March 31, which allows you to change your MA plan to another "like" MA plan, once during this period. There are also several Special Election Periods, all of which depend on your specific circumstances (ie. move to a different county etc). Your eligibility may not be restricted to your 65th birthday. If you are working and are covered by a group plan at your work, a qualifying event would occur once that group coverage is terminated, starting the clock on your various election opportunities. Still have questions? Click here or call 303.912.5090AnnuitiesWhat is an annuity? A contract from an insurance company that individuals generally use to accumulate money on a tax-deferred basis and that guarantees a fixed or variable payment to the annuitant at some future time. The guarantee associated with annuities are based on the claims paying ability of the issuer. What is a deferred annuity? An annuity you purchase either with a single sum or with periodic payments to help save for retirement. Earnings in a deferred annuity are not treated as taxable income until they are withdrawn. Withdrawals may be subject to regular income tax, and if made prior to age 59½, may be subject to a 10% IRS penalty. In addition, company imposed surrender charges may apply. The policy owner can choose the point at which he or she can convert the accumulated principal and any earnings in the contract to a stream of income. What are the different types of deferred annuities? The two most common deferred annuities are fixed annuities and variable annuities. What is a variable deferred annuity? An annuity under which a portion of the policy's premium maybe invested in a variety of investment divisions. The amounts allocated to the Investment Divisions will fluctuate in value based on the performance of underlying investments. Assets allocated to the Investment Divisions are subject to market risk. What is a fixed deferred annuity? An annuity where the individual knows what the current and guaranteed interests rates are and when the interest will be credited to the funds in the annuity. Rates are usually guaranteed for a specified time period. After the specified time period, the policy will generally receive a new interest rate every year equal to the standard rate being credited by the issuing company at that time. What is an indexed annuity? The principal or deposit (premium) is used to purchase guaranteed bonds. Only the earnings from the bond performance are used to invest in the market (puts, calls), the earnings of which are used to create earnings for the annuities. In this way, the principal in a fixed index annuity is never at risk of loss. Can I retrieve any of the deposited funds from the annuity short of "cashing" it out? Many annuity contracts will allow for the withdrawal of funds of up 10% of the face value of the annuity annually after the first year, without penalty. Other than this, withdrawals may be subject to surrender charges and or tax penalties. Still have questions? Click here or call 303.912.5090
|
|
Library of Documents (right-click or control-click to download each linked file): |
|
Documents could not be loaded.
|
|
Your Trusted Advisor for all Life, Health, Medicare, and Long Term Care Insurance Needs.
Providing you maximum choice of protection for you and your family's future.
Copyright © R Allan Jensen; portions © R.A.Hyman Web site by R.A.Hyman
|