How to bridge the health insurance knowledge gap for younger employees
More often times than not, when younger employees are searching for their own health insurance plans, they make common and costly mistakes due to the lack of education in regards to health care plans. Proper education could help the young generation of employees for their health, wellness, and future. Read this blog post to learn more.
With the passage of the Affordable Care Act, young adults were able to stay on their parents health insurance plans until the age of 26. But once they get their own health insurance, many young employees make common and costly mistakes because they don’t have the proper education when choosing their own programs.
This information gap could result in employees being hesitant to seek care, resulting in higher medical expenses for employees and reduced productivity from sick leave.
“It’s a challenge— there’s a fair number of employees that will come off of their parent's insurance at the age of 26,” says Amanda Baethke, director of corporate development at Aeroflow Healthcare. “There's not a lesson that you go through in order to understand insurance.”
How can employers help younger workers avoid health insurance mistakes?
It's beneficial for HR to do a training where they're going over what co-pays, premiums, deductibles and coinsurance are. When signing up for insurance, employees are trying to decide which insurance to pick and may not understand the full impact of that decision. Employees could pick the cheapest one because they want less out of their paycheck. There's just not a lot of discussions happening and employees are left blind.
What mistakes do young workers make when it comes to health insurance?
I’ll get a lot of questions from my team like ‘What’s an HSA and what’s the benefit?’ It's truly a lack of understanding, because nobody teaches it. A lot of mistakes will happen with out-of-network providers. They don't realize that there are insurance networks and then within those networks, there are more narrow networks underneath.
For example, an employee can call a doctor's office and ask if that office is in-network and the receptionist may respond that they are — especially for the national brands like UHC, Aetna, Cigna, Humana. However, many of those plans have narrow networks under them that allow them to better control cost. So the employee would want to ensure their particular group/plan is in-network.
Another thing is making sure employees know that even though they have a deductible, some preventative care is likely covered under their insurance. This will help them choose the right physician so if they do get sick later on, they can see that physician, rather than going to a hospital which would be more costly for them.
What specific role should HR take when it comes to educating younger employees about health insurance?
HR is responsible for making sure that employees understand the benefits that they're offering. HR works incredibly hard to deliver the best benefits possible and advocate for each and every employee. So why not just go the extra step and have a consultation with the insurance company to explain what the benefits mean, what is covered, what may not be covered, how to really navigate through the insurance company and work back with them.
SOURCE: Schiavo, A. (19 October 2020) "How to bridge the health insurance knowledge gap for younger employees" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/how-to-bridge-the-health-insurance-knowledge-gap-for-younger-employees
4 End-of-Life Documents and Why You Need Them?
While the majority of people would prefer not to think about the end of life, it is important to discuss the need for and understanding of end-of-life planning documents. What are these documents and why do you need them? Read this blog post to learn more.
Most of us aren’t keen to think about the end of life–especially our own. But discussing the need for and understanding end-of-life planning documents is important for all of us. So, what are these documents and why do you need them? Here’s a summary:
1: Durable power of attorney. This appoints another person to transact business, legal and financial matters for you until you die.
Why do you need it? Let's say you are incapacitated by an accident or illness, it allows the person you’ve chosen to act for you—and quickly. That can help you avoid a lot of problems, including hard-to-get guardianship and conservatorship rights. (If you are unsure of what either of these two terms means, this article makes it clear.)
2: Appoint a health-care representative. As with the first document, this allows someone to act on your behalf to make health-care decisions if you’re unable. It allows them to review health records, authorize admission to or discharge you from a hospital and make decisions about life-sustaining medical procedures.
Why do you need it? You’ll have peace of mind knowing that your wishes will be fulfilled as you intended, especially when it comes to life-sustaining medical procedures. It also helps avoid family arguments about who should have the final say.
3: Advance care directives or living will. This puts in writing the decisions you have made about your health care—instructions, if you will, for your doctor—so that your wishes are followed if you are unable to articulate them.
Why do you need it? It ensures, for example, that you receive the treatment you’ve decided on beforehand if you are terminally ill or permanently unconscious. It helps make sure that the treatments you receive in a terminal or permanently unconscious situation are in keeping with your wishes and provides guidance to your health-care representative.
4: A will or revocable living trust. This puts in writing who will inherit your assets when you die, and in what manner. These two documents can help eliminate, avoid or postpone taxes that are payable when you die. An attorney can help you decide which of these documents is better for you.
Why do you need these? If you do not have a will or a revocable living trust, basically the government will be able to decide how and to whom your assets are distributed, and it may not be to those you intended.
These legal documents require the guidance of a qualified legal advisor to ensure they meet the requirements of your state of residency, and if you already have these but have moved to a new state, they should be reviewed to ensure they comply with the laws of your state.
SOURCE: Feldman, M. (10 December 2019) "4 End-of-Life Documents and Why You Need Them?" (Web Blog Post). Retrieved from https://lifehappens.org/blog/4-end-of-life-documents-and-why-you-need-them/
Do I Still Need Life Insurance Once I Retire? Your Questions Answered
Do you still need life insurance after you retire? Going into retirement doesn't necessarily mean that you are financially sound. Read this blog post for more answers to your questions regarding life insurance after retirement.
Do I need life insurance once I retire? Just because you’re retired doesn’t necessarily mean you’re financially sound.
Think of all the different scenarios that may still be applicable: You may have been required to retire early; you may have had investments that have gone sour and haven’t had time to rebuild your nest egg. Additionally, there may be a need to cover final expenses, you may have children still at home who depend on you, or you may have a family member like an aging parent or special-needs sibling that you provide financial support for.
The bottom line is this: If you owe someone, love someone, or someone depends on you financially, you need life insurance. And just because you’re retired or old doesn’t mean those three things go away.
Do I need the same amount of life insurance coverage as I did before? If you bought the life insurance to replace income and have built up your investments, maybe not.
Then again, if you have built up your investments over the years, there may be some state or federal inheritance tax that will have to be paid upon your death. And even if there is no federal tax, there may still be significant state inheritance tax. There are also things like probate costs, administration costs; there might be final debt or a mortgage on house, too. So as long as there is some type of financial exposure, you need life insurance to match up with that.
If I don’t have one, is it still possible to buy a policy in retirement? Absolutely. Just because you’re old or older doesn’t mean you’re uninsurable.
I just got a call from someone doing planning for the family patriarch who’s 85 years old. They realized that right now, the estate is worth more than the combined amount of federal exemption and that there will be tax to pay. That’s where life insurance comes in, at less than a dollar for each dollar of tax.
Another reason to have the coverage is if someone has taken 100% pay-out on their pension, with no survivorship provision. If that person dies, no money gets paid out to the surviving spouse. This is more common than you think. Nor is it unusual to hear that someone remarries and forgets to change the pension beneficiary. Life insurance can ensure that the spouse is taken care of.
What else should I know about having life insurance in retirement? People don’t often talk about the living benefits of life insurance.
Let’s say you no longer need the death benefit, but are living with a lingering, terminal illness and may not have sufficient cash to pay medical expenses. The accelerated death benefit provision means you can go to the insurance company and pull down money from the policy to absorb the costs of that illness and avoid bankruptcy.
A permanent life insurance policy is also a place to put money aside that gives you a better rate of return than a low pay-out CD or putting money in a safety deposit box. It’s a way to have some safe money invested at no risk—it’s just there for when you need it.
SOURCE: Feldman, M. (9 January 2019) "Do I Still Need Life Insurance Once I Retire? Your Questions Answered" (Web Blog Post). Retrieved from https://lifehappens.org/blog/do-i-still-need-life-insurance-once-i-retire-your-questions-answered/
Providing an HSA, FSA, or HRA Health Plan for your Employees
When open enrollment hits annually, it is not uncommon for employers to feel exasperated when staring down a list of acronyms such as HSA, FSA and HRA. As it should go without saying, the most common first thought is, “What does any of this mean?” Even the most seasoned experts have difficulty with understanding the complexities of various care options. That’s why in this installment of CenterStage, Kelley Bell, a Group Health Benefits Consultant at Saxon Financial, is here to break down the ‘alphabet soup’ that is HSAs, FSAs and HRAs.
What Is an HSA?
An HSA stands for a Health Savings Account. Kelley stated that HSAs work in conjunction with your existing HDHP plan (given you already have one) to cover costs associated with eligible medical, dental and vision expenses. Available to open just like a bank savings account, Kelley said, “It is your account; yours if you leave the employer and can contribute as long as you have an HDHP and can use the funds until they are gone, even if you are no longer in an HDHP.” For most, this applies to retirement. If you are reasonably healthy throughout your working life, Kelley said you can carry a large HSA balance into retirement. At that point, the funds can be used to cover the out-of-pocket medical costs that often increase with you as you age.
In addition to all the above, certain tax advantages exist within an HSA plan:
- Contributions are excluded from federal income tax.
- Interest earned is tax referable.
- Withdrawals for eligible expenses are exempt from federal income tax.
HSAs are typically available through employers, but individuals can establish one, as well. Many banks offer HSA programs for their customers, meaning if your employer does not offer the benefit, you can create an HSA account there.
What Is an FSA?
An FSA is a Flexible Savings Account. Much like an HSA, these plans cover the payment of medical, dental and vision-related expenses, and contributions you make to the plan are tax-deductible. Similarly, when you open an FSA account, you’re typically provided with a debit card or checkbook, so the funds can be accessed in the account. However, Kelley stated an FSA plan has a catch: “An FSA cannot roll over unused funds from year to year and is not portable.” Therefore, any contributions made to the plan that have not been spent by the end of the year are forfeited.
Some employers, as Kelley noted, do have options that will help you avoid complete forfeiture of unused funds. Certain employers allow their employees to carry over up to $500 of unused funds into the following year, while others will extend the use of the funds for up to two and a half months into the new year. Employers generally will offer one or the other, but never both. Some, however, offer no such option at all.
Kelley mentioned general purpose FSA coverage, and stated it can “make you ineligible for HSA contributions.” She continued to add that certain types will not prevent HSA eligibility, i.e. limited FSA for vision, dental, parking or “post-deductible FSA” which reimburses you for preventative care or for medical expenses that are incurred “after the minimum annual HDHP deductible has been met.” As a result of forfeiting any unused funds in the account, an FSA is best used by someone who has ongoing and predictable medical expenses. In this situation, it is likely you will deplete the funds in the account, whereas if you are considered healthy and have limited medical expenses (i.e. minor illness, sinus infection), the potential for forfeiture is high, and you may have to forgo the account. FSAs are employer-sponsored and typically are an option as part of a ‘cafeteria plan’.
What Is an HRA?
An HRA is a Health Reimbursement Arrangement. Like the other plans described in this article, an HRA is a tax-free employer funded amount of money for healthcare expenses. Contributions, as Kelley explained, “can be excluded from gross income, meaning that won’t pay taxes on that money and reimbursements from the HRA are tax-free when used for qualified medical expenses.” Depending upon the type of HRA, unused funds may or may not be rolled over from one year to the next. However, employers may also allow employees to use their HRA funds even into their retirement.
The benefits of an HRA take action after the employee has met a specific portion (i.e. employee meets 1st $2500 of a $5000 deductible), making it easier for the employee to meet their high deductible. HRAs are good for employers who want more control over how their medical dollars are put to use. Naturally, if the employer is paying the cost of the HRA, it can be of an increased advantage than contributory health insurance premiums and direct payment for out-of-pocket expenses. With an HRA, the employer determines the reimbursements and does not have to contribute the same amount for all employee groups (i.e. tiers of employee coverage, employee/child, employee/spouse and family).
How Saxon Helps
It is important to understand the needs of every client and educate their employees on how to use their healthcare. Saxon values client education and service above all else. We make educating employees a priority and ensure their benefits are understood and easy to use. Saxon represents all of the major carriers, allowing us to secure the best plans and rates for you and your staff, which we review annually.
If you are considering offering an HSA, FSA or HRA insurance plan to your employees, contact Kelley Bell today at (937) 672-1547 or kbell@gosaxon.com to begin exploring the benefits of adding this superior level of coverage today.
Retiring Abroad
Retirement looks different for everyone but what does retiring abroad look like? How well does Medicare travel? Keep reading to learn about some of the realities of retiring abroad.
When Karen Schirack, 67, slipped on her way into her house in January and broke her left femur in multiple places, she had a decision to make. Should she get surgery to repair the fractured thigh bone and replace her hip near Ajijic, Mexico, where she has lived for 20 years, or be airlifted back to her home state of Ohio for surgery and rehab?
As the number of American retirees living overseas grows, more of them are confronting choices like Schirack’s about medical care. If they were living in the United States, Medicare would generally be their coverage option. But Medicare doesn’t pay for care outside the U.S., except in limited circumstances.
Expatriate retirees might find private insurance policies and national health plans in other countries. But these may not provide high-quality, comprehensive care at an affordable price that retirees expect through Medicare. Faced with imperfect choices, some retirees cobble together different types of insurance, a mix that includes Medicare.
That’s what Schirack has done. She pays about $3,700 annually for a private insurance policy through Allianz that covered her surgery at a private hospital in Guadalajara, about an hour from Ajijic. She also has a medical evacuation policy that would have paid for her flight to the States, if she’d opted for that. That policy costs roughly $3,000 for five years. And she pays for Medicare Part B, which she can use for care when she visits family in the U.S. (The standard Part B premium is $135.50 monthly.)
Schirack has a scar running from her waist to the middle of her thigh, but she no longer needs home nursing care and wrapped up months of physical therapy in June. After five more months of healing, she hopes to be back to normal.
Her private plan paid the equivalent of about $20,000 for her surgery. Before she left the hospital, Schirack had to cover her portion of the total, about $2,400, plus bills for other expenses, including blood transfusions.
After she left the hospital, she was responsible for paying for other services — home nurses, physical therapy and medications — and submitting receipts to the insurer for reimbursement. She estimates she has spent about $10,000 and has been reimbursed for about two-thirds of that so far.
If she’d had surgery in the States, she might have faced fewer paperwork hassles, Schirack said, “but all in all, I’m not going to complain.”
The quality of health care varies widely by country, as do the services available to foreign residents. And there are quite a few of these transplanted Americans.
From 2012 to 2017, the number of retired workers living in foreign countries who were receiving Social Security benefits grew by nearly 15% to more than 413,000, according to the Social Security Administration. The largest numbers were in Canada (nearly 70,000) and Japan (more than 45,000). Mexico was third, home to nearly 30,000 retired workers.
Commercial health care policies for them may provide decent coverage, but people can generally be denied a policy or charged higher rates for medical reasons. The plans may refuse to cover some preexisting conditions. Schirack’s policy, for example, doesn’t cover any services related to her allergies.
Private policies can be problematic for another reason: They may have age limits. The GeoBlue Xplorer Essential plan, for example, enrolls only people who are 74 or younger, and coverage expires when people turn 84. In contrast, Medicare eligibility generally begins at 65 and continues until a beneficiary dies.
And the policies aren’t cheap. A 70-year-old might pay $1,900 a month for an Xplorer Essential plan with a $1,000 deductible, said Todd Taylor, a sales director for GeoBlue. A plan with a $5,000 deductible might run $1,400 monthly. That doesn’t include coverage for services in the United States.
Rates may also vary by country. A 67-year-old American living in Costa Rica who buys a midlevel Cigna plan with a deductible of $750 for hospital care and $150 for outpatient care might pay $1,164 a month, said David Tompkins, president of TFG Global Insurance Solutions. The same policy might cost $913 in France, Tompkins said.
Claudia Peresman moved from Connecticut to San Miguel de Allende, Mexico, last November. She has opted for a private insurance plan, for which she pays about $100 a month. “What I wanted was catastrophic coverage,” she says. “Things are so affordable here that, outside of being admitted to the hospital, I can probably afford it.”(COURTESY OF CLAUDIA PERESMAN)
Since medical care is sometimes much less expensive overseas, some retirees opt to pay out of pocket for minor or routine services.
Claudia Peresman, 63, moved from Stonington, Conn., to San Miguel de Allende in central Mexico last November. On her first night there, she tripped in the bathroom, hit her face on a wall and split her lip. Her neighbors helped her get a cab to a 24-hour emergency room at a hospital about five minutes away, where staff cleaned up the cut and sent her home. She paid the roughly $25 fee in cash.
Peresman recently purchased a private insurance plan with a $2,500 deductible, for which she pays about $100 a month.
“What I wanted was catastrophic coverage,” she said. “Things are so affordable here that, outside of being admitted to the hospital, I can probably afford it.”
Even when retirees buy a private policy, Medicare is another piece of the puzzle that they have to consider. Once people become eligible for Medicare coverage, usually at age 65, they face a 10% premium penalty for every 12 months they are not enrolled in Part B, which covers outpatient services. (People who are 65 but still covered by an employer plan generally do not face that penalty.)
After paying into the Medicare system for decades, it’s no wonder some expats are frustrated that they can’t generally use the program outside the United States.
That’s just the way the law is written, an official at the federal Centers for Medicare & Medicaid Services said.
“CMS cannot speak to or speculate on congressional intent,” the official said.
And retirees should honestly consider whether they will spend the rest of their lives overseas.
“Even if that is their goal, is their health and mobility going to allow them to accomplish that?” said Dr. David Shlim, 69, who treated many expats when he ran a medical clinic in Kathmandu, Nepal, in the 1980s and ’90s. “People should imagine that they may need to come back to the U.S. and ask themselves how are they going to do that and afford that.”
Rules on whether noncitizens can enroll in a national health plan vary by country.
After living in the United States for nearly 30 years and raising a family here, Alberto Avendaño, 61, is moving back to northern Spain in August with his wife, Zuni Garro, also 61. Avendaño has dual citizenship, and his wife is a citizen of the United States. The couple can enroll in the Spanish universal health system and receive care there. They also plan to buy a private plan to use if they want to get medical services without a wait, said Avendaño.
Once they turn 65, they may enroll in Medicare as well, Avendaño said, depending on their circumstances. Their two children live in the United States.
“It is something that is part of our American system, and we want to have it,” he said.
Peresman also has a few years before turning 65 and making a decision, but she is leaning in the other direction. She is worried that the Medicare program may not exist in its current form when it comes time to decide.
“I’d sign up if it were absolutely free,” she said. “But I’m already paying $100 a month here.”
SOURCE- Andrews, Michelle. (23 July 2019). “Dream of Retiring Abroad? The Reality: Medicare Doesn’t Travel Well” (Web Blog Post). Retrieved from https://khn.org/news/retiring-abroad-prepare-to-possibly-mix-and-match-health-insurance/
Technology Influencing the Healthcare and Employee Benefits Industry
Technology is taking the world by storm and the healthcare/employee benefits industry is no exception. Whether you are an employee or an employer shopping for benefits can be the same for both parties. Here’s how technology will influence the industry in the future.
Apps will push value-based care
This tech shift to shopping for benefits will bring with it the rise of platforms and app-based insurance. The hope is that apps and platforms will make it easier to buy and understand insurance, and easier to get the best healthcare fast. That means high-quality care at a low price at a time that’s convenient for patients.
Emerging tech platforms should provide employees with more options for insurance — and a better understanding of those options — and make it easier to manage wellness, healthcare and insurance coverage. Apps will put more information in front of the average employee, giving them more freedom to make choices about their care.
The idea is these emerging platforms and apps tie together payroll and HRIS with wellness and healthcare navigator apps to help workers live healthier lives.
Here’s how it could work: When an employee isn’t feeling well, they first turn to their telemedicine app instead of picking up the phone to make a doctor’s appointment or visiting urgent care. Telemedicine is more convenient for them and costs less than a traditional doctor’s visit. If the telemedicine provider refers them to a specialist, they can then turn to a health navigator app to find a high-quality specialist at the lowest price for their next appointment.
When they're feeling better, they can use a connected wellness app to record gym visits, meditate, speak to a therapist and earn points for wellness activities like reaching a step-count milestone or getting a preventive checkup. These points can contribute to a real-time insurance premium discount that they can easily view from an app. The app can also present them with the opportunity to add or change voluntary benefits and, during the open enrollment, learn about their benefits choices and decide on the best plan.
Apps specific to shopping for benefits will provide more information to healthcare consumers and the necessary tools to make better care decisions. The hope is this technology will help people become healthier, get better care and use insurance more efficiently.
How HR fits in
Though employees will have the ability to make easy changes to benefit plans — especially voluntary benefits — the role of HR may change, depending on the employer’s size.
Large, more than 1,000 life employers will likely partner with a technology company and a benefits consultant who will manage the platform and the insurance-buying process for employees. Representatives from the HR technology platform, the benefits consultant and human resources staff will be responsible for educating employees about their options. Importantly, the employer will continue to sponsor employee benefits. They may present cafeteria-style benefits plans and provide a dollar amount toward the purchase of benefits.
Bigger changes may come for small companies with fewer than 100 employees. Many of these businesses may turn to a professional employer organization or other HR outsourcing arrangements with a built-in technology platform. Though healthcare insurance costs will continue to rise, small employers will continue to contribute to employee benefits premiums to help attract and retain talent.
The imperative for employers: communicate and educate
The only way this shift to platforms, apps, and other technology-based solutions will work is if employers, benefits brokers and platform companies themselves work to educate and communicate with employees about how this all works. Insurance platforms can no longer be staffed with technologists only; they need experts who understand health and welfare benefits in order to onboard employees and teach them how to get the most from their benefits platform.
And while HR’s role may change slightly, those teams are still in charge of helping employees learn about the benefits landscape and plan their healthcare and financial well-being for the next plan year. HR teams need to focus on communicating through any channel necessary, whether it’s email, social media, in-person education meetings or podcasts. It benefits everyone when employees understand how to choose the best plan and make decisions about appropriate care.
Putting more healthcare and insurance information in front of employees when they’re shopping for benefits and seeking services can drive them to make smarter decisions and look for better options when possible, but only if they understand how it all works.
SOURCE: Lisa, Mike. (24 July 2019). “Shopping for benefits: What technology holds for clients” (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/what-technology-holds-for-employee-healthcare-benefits?brief=00000152-1443-d1cc-a5fa-7cfba3c60000
4 Things Life Insurance Is Not
What is life insurance? People often get confused about what life insurance is and what it is not. Read this blog post for four things life insurance is not and a few tips on understanding them.
Are you confused about life insurance? I don’t blame you. When I first started writing about finances more than a decade ago, my understanding of life insurance was limited.
I knew about life insurance because it was offered through my employer, and I thought a $50,000 policy was a lot of money. I also recognized insurance company names from late-night TV commercials and the occasional bit of junk mail.
I understood “insurance” to be that stuff that you had to have for your car, your home, and your health. The “life” part was a big, blurry blob of “other.” If that’s how you’re feeling, here are a few tips that might help bring things into focus—by understanding the “nots.”
1. Life insurance through work is generally NOT enough. Since learning this myself some years back, I’ve noticed that many people never explore life insurance past what is offered through their work. Policies through work are a great benefit to have, but are usually limited to one- or two-times your salary or a fixed amount like $50,000. Plus the coverage typically ends when your employment there does.
How far will an amount like that go when you consider what’s left behind for your loved ones: the loss of your income and mostly likely debts and bills. What about things like rent or mortgage, child-care and education costs?
An easy way to get a working idea of how much life insurance you need is with a Life Insurance Needs Calculator from a neutral source like www.lifehappens.org/howmuch.
2. Life insurance is NOT a luxury item. Many people have not even considered buying life insurance because they’re convinced it’s a luxury. In a recent study by Life Happens and LIMRA, consumers thought the cost of a 20-year, $250,000 level term life insurance policy for a healthy 30-year-old was three times higher than it generally is. Younger people, in particular, overestimate the cost of a term policy by a factor of five.
If you took a guess at what that policy above would cost, what would you say? It comes out to about $13 or so a month for that policy. Definitely not a luxury—most of us spend more than that on a meal out.
3. Life insurance is NOT just about covering funeral expenses. While covering funeral expenses is very important, and a major reason people purchase it, life insurance does so much more. If something happens to you, life insurance benefits can help replace lost income, or pay off a mortgage, or help ensure a college fund or safeguard a retirement nest egg.
The proceeds of a life insurance policy are generally tax-free and can be used for anything your loved ones may need now and well into the future. Amazing, right?
4. Life insurance is NOT just for really healthy people. Granted, life insurance is less expensive the younger and healthier you are but don’t discount it just because you’re not in triathlete shape!
Many people don’t considering buying life insurance because they think they won’t qualify. But when certain health conditions, such as diabetes or high blood pressure, are under control with a doctor’s guidance or medication, it’s often possible to qualify. You may even be able to get coverage after a heart attack. Just know that it is probably best to work with an experienced insurance agent if you are concerned about a health issue and qualifying for coverage.
Now, if you’re a bit overwhelmed with this information and perhaps don’t know where to start, just know that a life insurance agent will sit down with you at no cost to go over your needs and help you get life insurance coverage to fit your budget. If you don’t have an agent or advisor, go here for suggestions on how to find one. You can also tap the Agent Locator there to find someone in your area.
Remember, the right agent or advisor can help you make sense of the confusion and get you on track for the financial future you want—with the protection your loved ones need.
SOURCE: Mosher, H. (30 October 2018) "4 Things Life Insurance Is Not" (Web Blog Post). Retrieved from https://lifehappens.org/blog/4-things-life-insurance-is-not/
9 Reasons Why Stay-at-Home Parents Need Life Insurance
It's not just parents with full-time jobs that need life insurance. Stay-at-home parents also need coverage. Read this blog post for 9 reasons why stay-at-home parents should have life insurance as well.
You’re probably already aware that a parent with a job outside the house most likely needs life insurance to protect their loved ones in case something were to happen. But it’s not just breadwinners who need coverage—stay-at-home parents do, too. Here are nine reasons why.
1. To replace the value of their labor. Stay-at-home parents are caretakers, tutors, cooks, housekeepers, chauffeurs, and so much more 365 days a year. And all that work comes with a price tag: Salary.com reports that stay-at-home-parents contribute the equivalent of a $162,581 annual salary to their households. If the unthinkable were to happen, a surviving partner would be on the hook for a slew of new expenses that the stay-at-home parent previously shouldered. Term life insurance is generally a quick and affordable way to get a substantial amount of coverage like this for a specific period of time, such as 10 or 20 years—often until you pay of your mortgage or the kids are grown and gone.
2. To factor in the contributions of any future income. Many stay-at-home parents return to the workforce once their kids are older. Life insurance could help bridge the gap that their future earnings would have contributed to the household.
3. To pay off any debt. From student loans to credit card debt to an informal loan from a family member, there are lots of ways to owe money. Life insurance can help settle any debts left behind so they don’t create stress for grieving loved ones.
4. To cover funeral expenses. Would you believe that the average funeral runs between $7,000 and $10,000, according to parting.com? And that may not cover the cost of the burial, headstone and other expenses. Many families want to honor a loved one’s memory but have trouble finding the funds to cover all the costs. Fortunately, the payout from a life insurance policy can help cover final wishes.
5. To leave a legacy. If a stay-at-home spouse has a passion for a place of worship, an alma mater, or another nonprofit organization, life insurance proceeds can be used to leave a meaningful charitable gift.
6. To boost savings. Permanent life insurance, which offers lifelong protection as long as you pay your premiums, may offer additional living benefits such as the ability to build cash value. This can be used in the future for any purpose you wish, from making a down payment on a house to paying for college tuition. Keep in mind, though, that withdrawing or borrowing funds will reduce your policy’s cash value and death benefit if not repaid.
7. To guarantee insurability. Your health can change in an instant. Getting a permanent life insurance policy when you’re young and healthy means you’ll have lifelong coverage. Then you won’t have to worry if later on, you develop a health condition that would make it hard or even impossible to get life insurance.
8. To receive tax-free benefits. Life insurance is one of the few ways to leave loved one's money that is generally income-tax free.
9. To give loved ones peace of mind. Losing a parent and partner before their time is already hard enough without having to worry about unsettled debts, childcare costs, funeral bills, and other expenses.
As you can see, life insurance for stay-at-home parents is just as important as it is for parents who work outside the home. Schedule a time to talk with an insurance professional in your community to learn about your options and get coverage that fits your lifestyle and budget.
SOURCE: Austin, A. (11 December 2018) "9 Reasons Why Stay-at-Home Parents Need Life Insurance" (Web Blog Post). Retrieved from https://lifehappens.org/blog/9-reasons-why-stay-at-home-parents-need-life-insurance-2/
Who Can I Name as a Beneficiary on My Life Insurance Policy?
Wondering who you can name as a beneficiary on your life insurance policy? A beneficiary is usually the person or people who will receive your life insurance payout after you die, but it can also be a trust, charity or your estate. Read this blog post to learn more.
First off, great job on buying life insurance! You took an important step by protecting the ones you love.
Every life insurance policy requires you to name a beneficiary. A life insurance beneficiary is typically the person or people who get the payout on your life insurance policy after you die; it may also be a trust, charity or your estate.
You can also name more than one beneficiary, as well as the percentage of the payout you want to go to each one—for instance, you could designate 50% to a spouse and 50% to an adult child.
You’ll typically be asked to pick two kinds of beneficiaries: a primary and a secondary. The secondary beneficiary (also called a “contingent beneficiary”) receives the payout if the primary beneficiary is deceased.
Providing for Kids
A big reason why people buy life insurance is to provide for children left behind. Usually this is done by making the surviving spouse or partner who cares for and is raising the kids the beneficiary. But what if you’re widowed or—God forbid—-both you and your partner pass away at the same time?
First, know that it’s not a good idea to name a minor as a beneficiary. That’s because the law forbids life insurance payouts to anyone who has not reached the age of majority, which is 18 to 21 depending on your state. If a child were to be named, then it would be turned over to probate court. The court will name a guardian who has oversight of the money/estate until the child comes of age.
Fortunately, there are two options. The first is to name an adult custodian. The custodian should be someone you can trust to use the money for things like housing, health care, and education until the child reaches the age of majority. At that point, any remaining money gets turned over the child and they can spend it any way they want.
The second option is to work with an attorney to set up a trust. In this scenario, the trust is the beneficiary and a trustee is named to manage and distribute the funds. The main advantage of a trust over naming a custodian is having more control.
A trust lets you specify how you want the money distributed—and it lets you do so even when your kids are adults. (One quick word of caution: Definitely consult with an attorney if you’re setting up a trust for a special needs child. They can help you create one that doesn’t impact your child’s eligibility for government assistance like Medicaid or Supplemental Security Income.)
Naming a Charity
Do you have a cause that’s near and dear to your heart? If so, you might consider naming a charitable organization as the beneficiary of your life insurance.
There are several ways to do this. They include naming the charity as a beneficiary on a new or existing life insurance policy, making the charity both the owner and the beneficiary of a life insurance policy, adding a charitable-giving rider to a life insurance policy, or working with a community foundation to figure out the best way to distribute a payout.
Final Tips
Think carefully about naming your estate as a beneficiary. This can trigger a long and costly legal process known as probate. A faster and more efficient solution is to name specific individuals or organizations as beneficiaries.
1. Get specific. Instead of naming “my spouse” or “my children” as beneficiaries, list their names along with their addresses and Social Security numbers. This saves a lot of time since the insurance company doesn’t have to track down information.
2. Always name a contingent beneficiary. Passing away and leaving behind life insurance without a living beneficiary could mean the payout goes to someone you never wanted your policy to benefit. It could also require a court-appointed administrator to sort things out.
3. Pick trustworthy custodians and trustees. Really consider who’d you trust your child’s financial well-being with if you weren’t in the picture. Your kids may love their uncle or aunt, but is he or she mature and responsible with money? If not, pick someone else who is.
4. Regularly review your beneficiaries. It’s a good idea to review your beneficiaries about once a year and after major life events like a marriage, divorce, the birth of a child, or a death in the family.
5. Communicate your wishes. Let your beneficiaries know your intentions and how to find the policy.
6. Be aware of special situations. There are some situations that could trigger a tax on the life insurance benefit—for instance, when the policyholder and the insured aren’t the same person. Likewise, things can get sticky if you live in a community property state and don’t name your spouse as a beneficiary. An insurance agent can give you life insurance advice on this and much more.
SOURCE: Austin, A. (29 April 2019) "Who Can I Name as a Beneficiary on My Life Insurance Policy?" (Web Blog Post). Retrieved from https://lifehappens.org/blog/who-can-i-name-as-a-beneficiary-on-my-life-insurance-policy/
Insuring the Times of Your Life
Do you have life insurance? According to the 2019 Insurance Barometer Study, by Life Happens and LIMRA, 43 percent of adult Americans do not have life insurance. Read this blog post to learn more.
Preston Newby was a youth minister. He and his wife, Tara, were driving with their son to visit family—excited to announce a new baby on the way. In the keeping with the kind of person Preston was, he stopped to help at the scene of an accident. That’s when he was struck by another car and killed. He was only 24.
Fortunately, this young couple had done their planning and had bought life insurance. So despite the emotional upheaval that Preston’s death caused, Tara, a stay-at-home mom, and her two sons were able to carry on financially as they had before. You can watch their story here.
How many other people have prepared like this for the unexpected? Unfortunately, not enough: 43% of adult Americans don’t have life insurance, according to the 2019 Insurance Barometer Study, by Life Happens and LIMRA.
Many people think, “I’m young. That won’t happen to me.” Statistically, they may be right. However, they could be up being one of the statistics. You just don’t know—and that’s the problem. The solution is life insurance.
If you have people you love and who depend on you, or you have financial obligations to meet, you need life insurance to protect against the “what ifs”—at every stage in life. Here are just a few reasons you may need life insurance, or more of it, throughout your life.
Single with no children: You may think you don’t need life insurance since you have no dependents, but if you owe money, you need it. It ensures that your debts, including student loans and funeral expenses, won’t be passed on to your family. Additionally, if you are taking care of aging parents or a special-needs sibling, or know you will in the future, life insurance is a smart way to make sure that care can continue uninterrupted.
Married or partnered: As you begin your lives together, you’ll likely incur joint financial obligations like buying a home, in addition to monthly bills. It makes sense to protect your spouse or partner with adequate life insurance. It’s also a smart move to get coverage in place now if you plan on having a family in the future.
Parents with children: If you’re in the midst of this stage, financial obligations abound. Many couples rely on two incomes to make ends meet and single parents may be their children’s one-and-only. Life insurance is critical at this point. When figuring out how much you need, remember that the economic impact you have on your family can be measured not just by how much you earn now, but by how much you’ll earn over the course of your working life. Life Happens’ Human Life Value Calculator can help you figure out what that will be.
Empty-nesters/retirees: Your kids are on their own and your mortgage is paid off, so you may think you don’t need life insurance. However, if you are still building your retirement nest egg, life insurance ensures that if something happens to you that your spouse or partner can still live comfortably in retirement, despite any shortfalls.
Keep in mind, life insurance is a simple answer to an important question: Would anyone suffer financially if I were to die. If the answer is yes, it’s time to sit down with an insurance professional.
SOURCE: Leyes, M. (13 May 2019) "Insuring the Times of Your Life" (Web Blog Post). Retrieved from https://lifehappens.org/blog/insuring-the-times-of-your-life/