Financial Security Means Finding the Right Insurance Balance

July 28, 2010

In the United States, insurance businesses employed 2.31 million people in 2008 and made gross premiums of $1.13 trillion making this country the most profitable insurance market in the world. With numerous companies offering a plethora of products, it is hard to traverse the jungle of companies and products that are available. However, finding the right balance of insurance products is a key component to your financial security. "Whether you are 18 or 85, understanding your insurance needs at every stage of your life is crucial to financial stability," states Frank N. Darras, the nation's top insurance attorney.

Let's take a look at one very large portion of the insurance market – the senior market. In the past ten years, the senior insurance market has grown at an exponential rate. Insurance companies have reacted with new products like long-term care insurance and combo policies that combine whole life insurance and long-term care insurance. There is also a lot of money being spent these days trying to convince seniors to sell their life insurance in order to take advantage of the asset before they die. See www.DarrasLaw.com.

"Senior consumers need to consider financial balance when looking at new types of coverage or when they are trying to decide what's the best thing to do with their existing policies," recommends Darras. "Some of the products offered, may look attractive in flashy ads and may be endorsed by famous people but do little to help seniors who need financial security in their golden years."

For example, "the combo" is life insurance combined with long-term care insurance in one policy. Since the average cost of a senior needing long-term care is $56,000 per year to cover at least two essential needs (i.e., bathing, dressing, eating or moving around) the combo may be a smart buy.

Here's how it works:

  • Buy a universal or whole life insurance policy that builds up cash value as you invest in a variety of options or chose the guaranteed interest.
  • As you age and find yourself in need of long-term care, you take money from the built up cash value of your life insurance.
  • The good thing is that withdrawals are tax-free.
  • The amount of the withdrawals is usually on a prearranged schedule set by the insurance company.
  • After death, the remaining cash value and death benefits goes to your beneficiary.

Financial Security Means Finding the Right Insurance Balance

The insurance company's pitch is that even if you don't need long-term care, you will still have something in the end – the life insurance death benefits. Sounds like a good deal.

However, Darras warns, "Make sure your agent is acting for you as your needs change. Make sure you deal with a reputable company who is going to be around when you need them and make sure you read and understand every part of the policy before signing anything."

If you are thinking about selling your existing life insurance policy, you will only get a fraction of what the policy could be worth upon death. The amount an investment company is willing to pay depends on your age, general health and they will do a mortality assessment before making an offer. "Just remember to get at least three quotes in writing and be prepared to give out all of your medical information to the investors," says Darras. "If your family is having financial difficulty, if you are experiencing high medical costs you can't afford, or the premiums are too high for you, then selling it might be a smart move for you."
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