Let’s talk! Call us 623-466-4797 or 480-559-7400
Health Insurance
What Is Health Insurance?
Health insurance is a type of insurance coverage that typically pays for medical, surgical, prescription drug and sometimes dental expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly. It is often included in employer benefit packages as a means of enticing quality employees, with premiums partially covered by the employer but often also deducted from employee paychecks. The cost of health insurance premiums is deductible to the payer, and the benefits received are tax-free, with certain exceptions for S Corporation Employees.
Key Takeaways
- Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured.
- Choosing a health insurance plan can be tricky because of plan rules regarding in- and out-of-network services, deductibles, co-pays, and more.
- Since 2010, the Affordable Care Act has prohibited insurance companies from denying coverage to patients with pre-existing conditions and has allowed children to remain on their parents' insurance plan until they reached the age of 26.
- Medicare and the Children's Health Insurance Program (CHIP) are two public health insurance plans that target older individuals and children, respectively. Medicare also serves people with certain disabilities.
Group Health Insurance
What Is a Group Health Insurance Plan?
Group Insurance health plans provide coverage to a group of members, usually comprised of company employees or members of an organization. Group health members usually receive insurance at a reduced cost because the insurer’s risk is spread across a group of policyholders. There are plans such as these in both the US.
Key Takeaways
- Group members receive insurance at a reduced cost because the insurer’s risk is spread across a group of policyholders.
- Plans usually require at least 70% participation in the plan to be valid.
- Premiums are split between the organization and its members, and coverage may be extended to members' families and/or other dependents for an extra cost.
- Employers can enjoy favorable tax benefits for offering group health insurance to their employees.
- Placeholder
Life Insurance
Life insurance is a contract between an insurer and a policyholder. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured policyholder dies, in exchange for the premiums paid by the policyholder during their lifetime.
Key Takeaways
- Life insurance is a legally binding contract.
- For the contract to be enforceable, the life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities.
- For a life insurance policy to remain in force, the policyholder must pay a single premium up front or pay regular premiums over time.
- When the insured dies, the policy’s named beneficiaries will receive the policy’s face value, or death benefit.
- Term life insurance (TLI) policies expire after a certain number of years. Permanent life insurance (PLI) policies remain active until the insured dies, stops paying premiums, or surrenders the policy.
- A life insurance policy is only as good as the financial strength of the company that issues it. State guaranty funds may pay claims if the issuer can’t.
When to buy
The right time to buy life insurance varies from person to person, depending on family and financial circumstances. Generally, you need life insurance if other people depend on your income, or if you have debt that will carry on after your death. After all, you don't want to leave your loved ones without money to live on... or on the hook for your credit card debt.
Key Takeaways
- If others depend on you financially—or you have debt—it's crucial to have life insurance.
- The sooner you purchase life insurance, the better, as it becomes more expensive with each passing year.
- Permanent life insurance has a cash value component. Holding the policy for longer lets that cash value grow over time.
The pros and cons of investing in PLI
Life insurance is something you may consider adding to your Financial Plan if you're interested in providing a measure of security for your loved ones. Proceeds from a life insurance policy can be used to pay final expenses, eliminate outstanding debts, or cover day-to-day expenses. Whether life insurance is a smart investment may depend on what you need and want a policy to do for you.
Key Takeaways
- Whether or not life insurance is a good investment for you depends on your individual finances as well as the length you'll need coverage.
- Term life insurance can make sense if you want to be covered for a set time period, while permanent life insurance can cover you for life.
- The investment portion of permanent life insurance grows tax-free. You can also borrow against the cash value to buy a house or pay for your children's college costs, tax-free.
- Alternatively, with term life insurance, all of your payments are put toward the death benefit for your beneficiaries, with no cash value and, therefore, no investment component; this means small premiums in exchange for a large death benefit.
Types of Life Insurance
When deciding whether life insurance is a good investment, it's important to understand the types of policies you can purchase. There are several variations of life insurance plans, but they generally fall into two categories: permanent and term.
Term life incurance is designed to cover you for a set term, hence its name. For example, you may purchase a 20-year or 30-year term life policy. These policies function similarly to other types of insurance policies you may carry, like car insurance; you pay a premium each month, and if something bad happens—in this case, your early death—there's a benefit paid out.
Permanent life Insurance, on the other hand, covers you for life as long as your premiums are paid. Certain types of permanent life insurance can also have an investment component that allows policyholders to accumulate a cash value. When you hear financial advisers and, more often, life insurance agents advocating for life insurance as an investment, they are referring to the cash-vallue component of permanent life insurance and the ways you can invest and borrow this money.
Permanent life insurance: Whole Life vs. Universal Life Insurance
These two types of life insurance both fall into the category of permanent life insurance. Unlike term insurance, which guarantees a death benefit payout during a specified period, permanent policies provide lifetime coverage. If you cancel your permanent life policy, you will receive the policy's cash value (minus any fees).
These types of life insurance policies are both typically comprised of two parts: a savings or investment portion and an insurance portion. This makes the premiums higher than those for term policies. Policyholders can also borrow against the cash value of the policy. For this reason, permanent life insurance is also known as cash-value insurance.
While similar in some respects, whole life and universal life insurance policies have some key differences. Whole life insurance offers consistency, with fixed premiums and guaranteed cash value accumulation. Universal life insurance gives consumers flexibility in the premium payments, death benefits, and the savings element of their policies. Here, we'll look deeper into each of these types.
Key Takeaways
- Whole life and universal life insurance are both types of permanent life insurance.
- Whole life insurance offers consistent premiums and guaranteed cash value accumulation, while a universal policy provides flexible premiums and death benefits.
- You can borrow against the cash value of a whole or universal policy.
Indexed Universal Life (IUL) Insurance
What if you could get the flexibility of adjustable life insurance premiums and face value and an opportunity to increase cash value—would you go for it? What if you could get this without the inherent downside risk of investing in the equities market?
Indexed Universal Life (IUL) Insurance
All of this is possible with an indexed universal life (IUL) insurance policy. These policies aren't fot everyone, so read on to find out if this combination of flexibility and investment growth is a good fit for you.
Key Takeaways
- Indexed universal life (IUL) insurance lets the policyholder decide how much cash value to assign to either a fixed account or an equity-indexed account.
- IUL insurance policies offer a number of well-known indexes, such as the S&P 500 or the Nasdaq-100.
- IUL insurance policies offer the possibility of cash accumulation while still providing a death benefit.
What Is Indexed Universal Life (IUL) Insurance?
Universal life (UL) insurance comes in a lot of different flavors, from fixed-rate models to variable ones, where you select various equity accounts to invest in. Indexed universal life (IUL) insurance allows the owner to allocate cash value amounts to either a fixed account or an equity index account. Policies offer a variety of well-known indexes, such as the Nasdaq-100 or the S&P 500. IUL insurance policies are more volatile than fixed ULs, but they are less risky than variable UL insurance policies, because no money is actually invested in equity positions.
IUL insurance policies offer tax-deferred cash accumulation for retirement while maintaining a deadh benefit. People who need permanent life insurance protection but wish to take advantage of possible cash accumulation via an equity index might use IULs as key person insurance for business owners, premium financing plans, or estate-planning vehicles. IULs are considered advanced life insurance products in that they can be difficult to adequately explain and understand.