Insurance – Tower Financial Group, Inc.

What is Term Life Insurance?

admin — Wed, 05 Jul 2017 15:34:16 +0000

Once you have determined that you need life insurance, and calculated how much coverage you require, you will have to choose between several types of life insurance policies. There are two very different types of life insurance contracts — term and permanent.

Term Insurance Overview

Term life insurance is often referred to as “pure insurance” because it involves only the payment of a premium in exchange for a promise to pay a death benefit in the event of your death while the contract is still in force.

Term life insurance provides protection for a specified maximum period of time and is usually renewable at the end of each period at progressively higher premiums. As you get older, your risk of dying increases, so the cost of term insurance goes up. Term insurance carries no cash value element, making it less expensive than permanent alternatives.

Annual Renewable Term

Annually renewable term (sometimes called Yearly renewable term, YRT, ART) is an example of a term insurance policy which has a constant face value and premiums that are adjusted upwards each year to reflect the increasing probability of your death in any given year.

Decreasing Term Insurance

Decreasing term insurance refers to a type of annual renewable term life insurance policy with a decreasing death benefit (face amount) and level premiums. Decreasing term is ideal for insuring a liability that is gradually being paid off, like a home mortgage.

Five, 10, 15, 20 and 30 Year Level Term

If you prefer, you may select a “level term” policy which guarantees you a level premium for a number of years (usually 5, 10, 15, 20 or 30) and a level death benefit for the same period.

The longer the guaranteed term, the greater the initial premium, but the longer the premium stays fixed. In most cases, if you know you will need your term insurance for a long period of time, a level term policy will prove less costly than an annual renewable term policy.

Permanent Insurance Overview

As the name implies, permanent (cash value) insurance is best suited for the individual with a long term (often indefinite) need. A permanent policy is really a combination of “pure insurance” and a cash value component. Premiums are considerably higher than term rates in the beginning years, and may include an increasing death benefit, a “cash value” associated with the policy, and tax-advantaged borrowing privileges against your cash value.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.

What is Permanent Life Insurance?

admin — Wed, 05 Jul 2017 15:33:43 +0000

Once you have determined that you need life insurance, and calculated how much coverage you require, you will have to choose between several types of life insurance. There are two very different types of life insurance contracts — term and permanent.

Permanent Life Insurance Overview

There are two unique types of permanent insurance. Each has its own benefits and disadvantages which must be weighed carefully.

Whole Life Insurance

This type of coverage covers you for as long as you live. Usually, this type of policy has a level premium for the life of the policy. Initial premiums are high, compared with term insurance premiums, but eventually they become lower than the premiums you would pay if you had kept renewing a term policy.

Universal Life Insurance

With Universal Life coverage, which also covers you for as long as you live, you can vary your premium payments and the face amount of your coverage. Most of your premium payment goes into an account, which earns interest. You may borrow against the cash value, but eventually, if the balance continues to drop, your coverage will end. To prevent that, you would have to start making premium payments again, increase your premium payments, or lower your death benefits. Generally, your policy will state that it will pay the premiums from the cash value of your policy.

The Basics of Homeowners Insurance

admin — Wed, 05 Jul 2017 15:33:11 +0000

Your home and the things in it generally represent the largest asset your family will ever have. For this reason it is very important to have your home and its contents insured at all times. One should have insurance on its contents, against theft, fire, windstorm, or some other disaster. It is also wise to be insured for personal liability. This would cover an accident that might occur to someone who is visiting your home.

What’s Included

A standard policy provides limited protection against (for example) fire and theft. Broader coverage gives you insurance for additional losses except those that are excluded from the policy. You can also get special insurance for such items as jewelry, artwork and collectibles. You pay a separate premium for things of this type.

What’s Excluded

No basic policy covers losses resulting from war, riots, police actions, nuclear explosion, or “acts of God.” You can sometimes get an endorsement to your policy to cover situations that are normally excluded, such as floods and earthquakes, but it will be expensive.

What’s Liability Coverage?

Liability coverage protects you if you are sued for causing property damage or injuring someone.

What’s a Deductible?

This is the amount you pay for a loss before the coverage kicks in. Deductible amounts vary. Your insurance costs less if you take a larger deductible, but, of course, you will have to pay the amount of any loss up to the deductible.

How Much Insurance Should You Buy?

Insure your house for at least 80% of its replacement value, but most financial planners recommend that you insure your house for its full replacement value, and perhaps the replacement value of the contents of your home. Carefully read the terms of the policy so there will be no surprises in the event of a loss.

Caution…

When buying a home, if your down payment is less than 20% of the purchase price, you will probably be required to purchase mortgage insurance. Do not pay it as part of your mortgage, pay it separately. End it when your equity reaches 20% of the home’s value. Mortgage insurance benefits the mortgage lender, not the individual.

Health Insurance – How It Works

admin — Wed, 05 Jul 2017 15:32:31 +0000

Without health insurance, a single illness can cause serious, and often irrevocable, financial hardship.

Insurance of any kind is intended to transfer financial risk to an insurance company in exchange for a reasonable insurance premium. Where most insurance coverages pay once a loss has occurred, health insurance has the added benefit of paying to keep your loss from getting worse.

Health insurance is probably your most important coverage since it can be the difference between life and death.

Fortunately, most employers offer some form of health insurance. Often you will have to select from several different alternative plans with differing coverages and premiums.

There are two broad categories of health insurance coverage. One is fee-for-service and the other is managed health care. Under managed health care there are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

Fee-For-Service

Fee-for-service and managed health plans have distinct differences in the amount of control the policyholder has in choosing doctors and hospitals. Fee for service plans offer you the greatest amount of choices, allowing you to select doctors and hospitals based on your needs and preferences. This greater amount of choice comes at a cost, fee for service plans are usually more expensive than managed care plans.

Under a fee for service plan, your doctor will submit a bill to your insurance provider, or, if he or she does not have a relationship with your provider, you may have to pay the bill directly and get reimbursed by your provider. Under this plan you can see any doctor you wish. You will most likely be responsible for a percentage of every expense, often 20%.

Fee-for-service plans also have an annual deductible; these generally start at $100 for individuals and $500 for families. Generally speaking, the higher the deductible, the lower your premiums. Before receiving the reimbursement you’ll have to pay the deductible amount.

If your doctor charges more than is “reasonable,” you will have to pay the difference. You can appeal this if you feel the doctor is charging the same as the other doctors around your area.

Under fee for service plans there is usually a limit to how much you will have to pay before the plan reimburses you at 100%. Some plans also have a lifetime limit on benefits, usually at least $1,000,000. This seems very high but it is not uncommon in serious situations that this number is met.

Managed Care

There are three major types of managed care health plans: HMOs, PPOs, and POSs. Many of these plans charge a co-payment of $10 or $20 a visit. The disadvantage of an HMO is that you must use the doctor and hospitals that participate in the plan. The premiums are generally lower than fee-for-service plans.

With a managed care plan you will have to select a primary physician who will be responsible for coordinating your care. You will need to be approved by him to seek care by a specialist. You must also get authorization for any hospitalization you may require. As you can see, the lower premiums associated with managed care are the result of allowing the managed care provider to make many of your health care decisions for you.

PPOs and POSs differ from HMOs in that not only do they have a network of providers, but you are also allowed to use physicians outside the network.

Other Considerations

If you choose not to utilize the coverage offered at work, or if no coverage is available through your employer, you could get your own personal policy or go through a group. Group policies have lower premiums. Also, some group policies do not ask questions about your health. Nevertheless, some policies will not cover preexisting conditions for up to 12 months. You will want to understand all the pre-existing limitations that your coverage includes. If you have had health coverage for at least 2 years and change employment you won’t be affected by the exclusion.

If you are terminated from or leave a job where health insurance was provided for you, the government has established guidelines for maintaining your old coverage at your own expense until you can find new coverage.

Do You Really Need Private Mortgage Insurance?

admin — Wed, 05 Jul 2017 15:32:01 +0000

If you purchased your home paying less than 20% down, chances are you had to purchase “mortgage insurance” in order to qualify for your loan. A mortgage insurance policy protects the bank in the event they are forced to repossess your house and sell it at a loss. As with most other types of insurance, you pay a monthly premium on top of your monthly mortgage payment for this policy. A mortgage insurance policy provides the means for purchasing a house you may otherwise be unable to afford, due to a limited down payment.

Once you own a significant portion of your home, usually around 20%, this insurance policy can, and should, be eliminated. Recently enacted federal law made it a little bit easier to rid yourself of your monthly mortgage insurance premium by requiring your lender to automatically eliminate your mortgage insurance, once you own 22% of your personal residence. Unfortunately the 22% equity is based on the value of your loan compared to the home’s purchase price so the lender is not taking into account appreciation on your home – just the gradual paydown of your mortgage.

In addition, these new laws did not take effect until July of 1999. If your mortgage was taken out prior to this date, you will need to check with your lending institution to find out how to eliminate the monthly mortgage insurance premium.

Determining Your Life Insurance Coverage Needs

admin — Wed, 05 Jul 2017 15:31:27 +0000

Like auto insurance coverage, it is sometimes difficult to see the true value of life insurance coverage until you actually need it. In the meantime, the only way you will feel comfortable with your life insurance policy is if you understand, and agree with, the reasons you bought it in the first place.

There are many reasons for an individual to own life insurance coverage. Perhaps the most compelling reason is to purchase a death benefit which will provide for the financial needs of their survivors.

Determining how much life insurance coverage you need is a four step process:

Determine total short term needs in the event of your untimely death
Determine total long term needs in the event of your untimely death
Determine total resources available to family members
Provide insurance coverage for any remaining shortfall

Determining Your Total Short Term Needs

Short term needs are financial obligations and/or expenses arising within six months of death. Examples of short term needs include expenses you pay now such as:

loan balances (automobile loans, etc)
outstanding credit balances (credit cards, revolving lines of credit, etc)
mortgages (first mortgage, second mortgage, equity loans)

Add to these current expenses any death-related expenses which must be paid in the short term:

funeral expenses
final medical costs
estate settlement costs
estate taxes due
charitable bequests you would like to make at death

And if you don’t already have one, your survivors should be left with a liquid emergency fund sufficient to get them through any unexpected financial needs, perhaps six months worth of living expenses.

Determining Your Total Long Term Needs

In addition to covering your survivors’ short term needs, some level of monthly income will be needed to maintain their standard of living and meet financial goals you have made together. These long term income needs include:

a future income stream to cover standard of living items (we recommend that you identify several time periods with unique needs such as while kids are in home, when kids are gone, and your spouse’s retirement years.)
college expenses that you would like to cover for your dependents
elderly care expenses you plan on contributing for relatives
monetary support for a disabled dependent
mortgages (first mortgage, second mortgage, equity loans)
child care costs if your spouse will work after your death

The value of these future obligations is discounted back to present value amounts. This gives us a single dollar amount which, if invested, could provide funds for all of your long term goals.

Calculating Your Total Available Resources

At this point, we have a pretty good idea of what your total cash need would be in the event of your untimely death. With any luck, you have already begun to set money aside to cover some of these costs, and the government has a plan to help you as well.

Estimated earned income of your survivor(s)
Survivor Social Security benefit (continues while you have children under the age of 17)
Retirement Social Security benefit (begins approximately when your spouse turns 65)
Survivor benefits from your pension plan

The value of these future resources is discounted back to present value amounts. This gives us a single dollar amount which we can use to offset your total needs.

Providing Funds To Cover A Shortfall

When we compare our total needs to our total resources, most of us will find a shortfall. A shortfall situation means that our survivors will be left with the choice of either finding additional resources that we have not been able to identify, or do without many of the financial needs that you hope to cover.

Life insurance is uniquely suited for covering such a shortfall. It is a means of sharing the financial risk of premature death with many, many others who have similar concerns.

You pay a relatively small premium to an insurance company in exchange for their promise to pay your beneficiaries a specified death benefit in the event of your death. A financial need that arises from your death can be eliminated by a financial resource that is created upon your death.

Factors To Consider When Selecting Life Insurance

In an ideal world, we would each carry sufficient life insurance to continue to provide a lifestyle for our survivors similar to what they enjoy now, with us here. We cannot always afford to fully cover our survivor needs, particularly in our early years.

However, life insurance comes in many shapes and sizes. By carefully considering the type and amount of life insurance that best meets your needs you can ensure that you have provided for your family’s monetary needs, even if you are not here to do the providing.

Auto Insurance – How It Works

admin — Wed, 05 Jul 2017 15:30:28 +0000

Anyone who has ever owned a car knows that automobile insurance is expensive. A survey conducted by the National Association of Insurance Commissioners found that the average annual premium for each car was $855 (that includes liability, collision, and comprehensive coverages). Understanding auto insurance is the first step towards ensuring that you have the right coverage at the best price.

Risk

The cost of your individual coverage depends on many factors — factors that the insurance company calls Risks. The lower risk you represent to the insurer, the lower your insurance will cost. The cost of your insurance will be impacted significantly by the type of car or truck you buy. A few of the factors that impact your risk include:

Safety features on your auto.
Crash test results for your auto.
Average repair cost for your auto.
How many miles you drive each month.
If in school, your grades may impact your cost.
Your age (younger drivers statistically have more accidents.)
Your gender (males typically have more accidents than females.)
Your geographic location.
Your driving record.
Your marital status.
How you use your vehicle.
The make and model of your vehicle.
Your claim history.

Reducing the Cost of Your Auto Insurance

You can often significantly reduce your auto insurance coverage costs by taking advantage of discounts offered by insurers. Discounts are available to drivers who seem like better risks to insurance companies. Look for the following types of discounts when pricing your insurance needs:

Insure all your vehicles with the same insurer.
Insure your home and car with the same insurer.
Consider purchasing your life insurance coverage and car insurance from the same company.
Take a driver’s education course.
If in school, get good grades.
Buy a car with safety equipment like air bags, automatic seat belts, and antilock brakes.
Invest in antitheft devices.
Keep your mileage low. The less you drive, the less risk you have of being in an accident.
Drive safely. A good driving record is your most valuable cost cutting opportunity.

Coverage

Many features of your auto insurance coverage will be based on your state of residence, but many are the same across state lines. Here are a few coverage options you will have to consider:

Liability Insurance: This coverage protects the owner against losses from legal liability arising from bodily injury or property damages caused by an accident. This coverage can be in one single amount for each accident, or it can be broken down and “split” such as $50,000 / $100,000 / $25,000 (per person / per accident / per property damage.
Medical payment coverage: This provision covers medical and/or funeral expenses incurred though bodily injury resulting from an auto accident. The coverage is generally $5,000 to $10,000 per person per accident.
Physical Damage Coverage: This helps to cover the physical damage to the insured auto. Collision covers collision costs. Comprehensive covers losses from non collision incidences. Some examples of this would be theft or storm damage. Policy limits for physical damage are generally based on the value of the insured automobile and are typically limited to the lesser of repair cost or actual cash value.
Uninsured/Underinsured Motorist: Although most states require car owners to have insurance, some motorists do not. Uninsured motorist coverage pays for injuries sustained in an accident with an uninsured (or hit and run) driver. Uninsured motorist insurance covers the difference between actual losses sustained and what an insured can collect from an at-fault driver, up to policy limits.

Endorsements

In addition to standard coverages, you may want to consider additional coverages called endorsements. Two of the most common are:

Extended Liability: This insurance is used to cover automobiles that are not legally owned by the insured, such as an auto owned by the employer but furnished for the use of the insured, which would not generally be insured.
Miscellaneous Type Vehicle Endorsement: This insurance allows other vehicles to be covered such as motorcycles, campers, golf carts, snowmobiles, etc.

Other Considerations

When purchasing auto insurance or in reviewing your existing policies, there are some general considerations you will want to be aware of. Make sure the policy provides as much protection as is necessary. Know the maximum dollar amount the insurance company will pay. Be aware of your deductible amount, which is the amount you must pay before your insurance company will pay anything. Know what your responsibilities are if an accident occurs.