Why you should consider owning an Annuity.

An annuity is an insurance product that helps ensure a steady stream of income is available to the recipient. It is also a tool for accumulating wealth.  Yes the two prior statements are a bit overly simplified, but let’s build on that to better understand annuities, what they are, and how they are useful.

Today there are fixed and Variable annuities. I tend to only like the fixed annuities since variable annuities can easily lose value where fixed annuities don’t lose value, however if they are cashed in before the contract is complete, it is possible to get less out than was put in as premium. Keep in mind the early surrender fees when you consider an annuity.

Fixed annuities can be single premium or multiple premiums based. They can be annuitized immediately or held in accumulation phase for some time after which they can be annuitized.  Those held in accumulation phase can even be paid out as a lump sum at a future point in time, with no penalties as long as the cash in date is past the surrender period, or as per the insurance contract other situations occur.  Some of these early out situations include death or entering a nursing home. Each policy will spell out exactly what these early out provisions allow.

The fixed annuities which are annuitized immediately are primarily used for those who have a lump sum of money that want set up to pay out over a set period of time or for life.  The distribution period is determined as part of the variable parts to the insurance contract, by the purchaser of the annuity. Thus, if you buy an annuity with a lump sum of money you will have to choose how long you want it to pay you back. The length of time for the payments to occur will directly impact how much of your principal you get back each month. This is a good time to take a moment to step back and talk about the annuity payments.

As you annuitize the contract you begin receiving payments that are a set amount. The payment includes both a principal (part of the premium you paid initially) and earnings.  You will pay taxes on the earnings coming out of the account (as long as you used post tax money to purchase the contract) only. If you used pre-tax funds the entire payment is subject to taxes. The contract application will track if the money is pre/post taxes and as you receive payments the non-taxable and taxable income will be calculated and an IRS form 1099 will be issued each year.

If you chose to purchase an insurance contract using multiple premium payments or hold the contract in a stage where more money accumulates as you defer payment, then you have to look at the various options for growing the value of the policy while it is in deferral. You can choose from set amounts specified by the insurance company or you can pick a bit more risky strategy and go with an indexed annuity. The fixed rate annuities will grow at a know rate per year so you can more easily calculate where the value will be at a given point in the future. Of course the exception is if the deferral lock in period is longer than the guaranteed rate period, then a few years out you are looking at a new rate being announced. 

Usually most annuities give you several buckets from which to choose when putting the money in, and those that don’t often offer an interest rate that will be locked in as long as the surrender period so it is not a total shot in the dark that at the interest rate reset time you could go down to a much lower interest level. These are all general terms because ultimately each contract is unique and when buying that is what you must look at to decide if the annuity is good for you or not.

If you choose to go with an indexed annuity, you are able to put some portion up to all of it into a bucket where the income is based on a specific market. The nice feature with annuities being insurance contracts is there are guaranteed minimums, and on a fixed annuity platform you can’t lose your initial/subsequent premiums due to market losses. In fact in a negative return year for that index, you don’t lose money you just end up with zero income added to your accumulation value.

The buckets described above are a simple way to understand the process of assigning income to the premiums paid for the policy. There are various moving parts which can affect the final amount deposited into the buckets each year.  Included are how often the income is recorded, when the accumulated income becomes part of the accumulation value on which new income is based. Percentage of the gain, when looking at indexed buckets, as measured thru maximum income percentages and participation points. These are critical to know and understand for these kinds of contracts.

Now that you have some education about how annuities are designed and how they work, let’s talk about why an annuity can be a good purchase. First I want to share that not everyone or every situation is right for an annuity, so if you think I want to convince everyone they need an annuity that is not the case.  Annuities are very good for those who want to distribute accumulated money in a manner that guarantees distribution thru death of the annuitant.  You can also add a period certain onto the annuity to ensure at least for a set number of years someone gets the money in the event of an early death for the annuitant.

Another circumstance where an annuity can be a good option is where putting money away is important but where that money has to be safe from loss of value for any reason. In these cases a fixed annuity, depending on the method of earning an income within the annuity can be a good way to guarantee the premium while growing the value of the money.  There are tradeoffs to consider such as can I risk some loss for possibly more return or not, and if no loss of premium is acceptable then an annuity may be the answer.

If you flip it around and decide you need a set amount of principal for retirement, an annuity with periodic premiums can be used to pay into the policy to ensure a value of a set amount at some future point in time. It can then be taken as a lump sum or even as a annuitized payment, so using it as a planned savings tool is yet another option when it may be a good choice.

 Another situation where an annuity may be a good option is those who want to have some protection against long term care needs without the premiums of a traditional long term care policy. There are a few annuities that have a rider for long term care under which the value of the annuity grows substantially when being used to pay for long term care needs.  In these cases if the annuitant dies without ever using long term care the money can be paid to a beneficiary, or it could have been drawn out anyhow for non-long term care living needs.

The key when you are considering an annuity is to lay out the specific need for the annuity before you start talking with your insurance broker.  Knowing up front why you want an annuity will help prevent you from getting the wrong annuity, or even getting one when it does not really serve your needs. Of course situations change so the next thing to know is the early contract termination penalty, which is a part of most annuity contracts. 

Probably the biggest take away from this overview on annuities is that each annuity buyer must know and have explained well the product(s) they are buying and make sure the product being purchased meets their needs. There are so many products one or more likely fits your needs while a hundred others may sound good but don’t really fit your needs.  A good broker who is properly licensed and has appropriate annuity training can help with the process.  We are certainly willing to chat with you about your annuity needs, give us a call.

Why you should consider owning Long Term Care Insurance.

Long Term Care Insurance is important to protecting your assets in the event you or your spouse must be housed in a long term care facility such as assisted living or a nursing home. This is not about providing for medical care expenditure coverage, but is about ensuring that non-medical assistance care can be paid.  This is one of the types of care not covered by Medicare.

Although nursing home care may be covered by Medicaid there are two factors that make relying on Medicaid tough. First, you must be able to find a nursing home that (a) accepts Medicaid, and (b) has a Medicaid bed available.  This means you could end up living far from friends and family and in a less desirable facility than you initially planned.   Second, you must meet the income and asset test to get Medicaid to pay.  Of course if your income and assets do not meet the test you can spend down to Medicaid qualifications by paying for your care to begin with.

Let’s talk for a moment about spending down to qualify for Medicaid.  To do this you often will impoverish your spouse in the process. Most folks don’t want to go into a nursing home where they at the same time cause their spouse to have a drastic change in lifestyle. With law changes not so long ago the look back period used to evaluate assets is five years. What this means is you can’t give away assets in anticipation you will need them to pay for long term care, and then claim Medicaid eligibility, unless the gifting of the assets was more than five years ago.

Given that your medical insurance (if you are under 65), Medicare, Medicare Supplements, and Medicare Advantage Plans do not pay for your nursing home care (unless it is for medical reasons) you either pay yourself, qualify for Medicaid which is tough, or use your Long Term Care Insurance Policy to cover most if not all of the costs for your care. 

Using the Long Term Care Insurance (LTCI) allows you more freedom in choosing where you want to live and how you get your care. Many using LTCI to cover costs of the care receive in home care.  One thing I should point out is that LTCI may or may not cover all costs of the care. Each LTCI policy is built to custom specification that the agent and client discuss together.  Some of the parts of the policy that must be customized are length of coverage, amount of benefit which can be defined as a daily or monthly benefit (there are differences) as well as percentage of coverage used for home care and the biggie inflation protection.  Each of these components is important because it will dictate what level of benefit is available to pay or help pay for services you must receive.

 In the event you want at all costs to remain in your own home for care, the cost is far greater than if you go to a nursing home, based on needing outside care to come in on a regular basis. In this instance you need to ensure the policy is set up where the benefits are set up where that in home care will be available and where nursing home care benefits are more secondary. Conversely if you would never think of in home care you can cut back on that benefit a bit and focus the benefits on ensuring maximum in nursing home care.

The policy is triggered by Activities of Daily Living (ADL), most policies trigger if there are two or more where you need assistance from someone with those ADLs.  ADLs include dressing, transferring, toileting, eating, bathing, and maintaining continence.  Help with these can be from trained aides, it doesn’t have to be from a registered nurse.  In fact many folks during their elimination period (similar to a deductible although it is measured in days not dollars) have help from family and/or friends.

With the basic understanding of the long term care coverage options lets discuss why you really need it in more depth. First you can’t really rely, other than if you are willing to become impoverished first, on any government payments to cover your convalescent care needs. So you can pay out of your assets which if you are single may be just fine. I should say if you are single and don’t have plans to leave behind a legacy to your offspring, or perhaps you have none.  In these cases it is possible you can pay as you go. 

More typically you have a spouse or other family who depends on you for support or to whom you wish to leave behind a legacy. In these cases LTCI helps ensure you can still support your family and/or leave behind a legacy. In these cases you work together with an agent to provide for the amount of coverage you deem adequate to provide for coverage and to ensure you don’t bankrupt the family.

With a LTCI policy you secure coverage in amounts you choose whereby that same amount of money is no longer burned out of your own assets or income to pay for the care. Thus your family and friends are able to continue living with fewer financial affects of your moving into a long term care setting, or having extensive in home care.  If you work from within your own home you may even be able to continue working depending on many factors which would then even put less negative financial impact on your family.

One thing I haven’t pointed out and many probably have not thought about, LTCI is not just for retirees, many folks under 50 are seriously injured, to the point they trigger the ADL requirements to start the policy paying out benefits. To that end and because the policies are typically less expensive if purchased while young, everyone at all stages of life should consider such a policy.  I’m no oldie and have a policy on myself and one for my wife as well. We help pick a good Long Term Care Insurance plan in Texas where your needs are priority.

With the above it becomes apparent why it is important to have a LTCI. It helps ensure you get more choice in where your care is delivered, by whom, and puts less financial strain on your own family. These policies don’t have to be cost prohibitive and are best bought while you are young and still healthy. They do require a full underwriting process, so prior medical conditions may affect final pricing and ability to obtain coverage.  It is something worth calling your agent to review.
Contact Brooks Insurance Services for your personalized LTCI needs analysis.  

Why you should consider owning life insurance.

Life Insurance is something you buy not generally to help yourself (although there are uses for life insurance where you benefit while you are alive) but is there to help those you leave behind.  There are many reasons to buy the coverage and each is unique. Each life stage may require different coverage amounts and even kinds of coverage. Some life stages are served well owning more than one policy.

For youngsters, buying a moderate value permanent life policy is often a good idea because there is a long horizon for paying on the policy and the premiums are lower.  Youngsters have no real need for term coverage either, thus a permanent policy that is with them for life is a good choice. Often you can get $100K for a young child for a few hundred dollars per year.  Depending on the actual policy that initial death benefit will grow significantly as the child gets into their older ages.  Ultimately there are many choices and a professional agent will guide you to the policy which best fits the needs for your unique situation.

When folks get married and start families they should be looking at life insurance. Newlyweds need to consider what happens to my spouse if I am no longer around. For many they figure the spouse will just figure it out on their own. For someone who is renting an apartment that may be fine and dandy but if a new house is now owned and there are other debts, perhaps leaving it to the surviving spouse puts their debt at a level that can’t be repaid or some other worse situation.

Newlyweds need to take stock of debts and assets and plan accordingly. Where the biggest debts are likely to decline over the years (new homes, cars, etc…) a term policy is usually sufficient to provide funding to cover the debts. If those assets are no longer needed they can be sold off by the surviving spouse but in a manner that brings in the true value of the assets not a fire sale to pay off the debts.

Of course leaving money behind for the surviving spouse to live on, which is most critical when there is only one working spouse, is best served by a permanent policy. If nothing else it can help cover the cost of a funeral which can get very expensive fairly quickly.  Even for those who are single a good permanent policy purchased at any age helps solve the mystery of who will have to pay for the final expenses which can include more than just a funeral.  Sadly it does cost money to die.

New families are another situation. When children are born typically both parents expect to be around to raise the child and provide for their needs while they grow up. Sadly many kids do lose their parents and when there is no life insurance to help fund raising the kids often the kids suffer.  Proper planning whereby money is left to the surviving parent or other guardian can provide funds that can then be used to help raise the children.  Most typically this is handled thru a term policy since over the years the need goes away.

Permanent and temporary (term) life insurance can be used to cover the above and many other needs.  Knowing which policy to use and when to use it, is what as agents we know and with the information we help guide you towards the policy that best fits the situation. We are here to guide you by asking the questions that need to be answered by you before we can place you in the right policy or policies. Yes, there are even times where a set of policies is the best answer to solving for your insurance need.  For help with life insurance in Houston to pick the most appropriate coverage let us know how we can help you.

As I mentioned at the beginning there are even uses while still alive for life insurance. I will cover those in greater detail later, but saving for college in a tax deferred manner as well as various forms of executive compensation are among the ways you can use life insurance to pay-off while you are still alive.  One benefit of going this route is in the event of death the full death benefit is there as well.

Feel free to contact us to discuss your life insuranceneeds.

Why should I use a Health Insurance Agent to help me set up an Individual Health Policy?

The services of a professional health insurance agent are free (for individual products) to the client. That is a big first step in the right direction.  For group products depending on the size of the group a fee may be negotiated as some carriers have moved away from paying commission and it would be hard for anyone to expect their agent to work for free.

A professional, knowledgeable agent will know more than just the price of a product. They will understand the differences among and between different products offered. There are more than one kind of health insurance policy out there and they are not yet all the same. Presently each carrier has their own model for delivering the coverage and decides what benefits they feel are needed in their major medical policies.

A professional agent can help you understand the differences between the gimmicky health plan for sale signs and compare/contrast them with a real major medical health insurance policy. Also, where appropriate they are able to help you pick a temporary coverage plan. It is a professional health insurance agent who knows all of this information and can use their knowledge to guide you to the right plan choice.

For those who prefer to go at it alone and use the internet, know that yes information is out there but it will take many hours of research to gather information that will just begin to get you to the level of knowledge you need in order to be somewhat familiar with the terminology to look at what coverage you can get.  Then you have to spend hours comparing plans and try to figure out what looks best. Beyond that you will have to understand the underwriting parameters and how each carrier will rate and/or write your policy as not all carriers do so the same way.

Thus, even if you can choose your policy on your own, it is practically impossible to know how the insurance carrier will review your application without submitting one. If you then get an outcome other than as expected, you will have to go again with another carrier, all very time consuming and with some carriers at an application fee cost for each try.

A professional agent can assess your insurance need, recommend the best plan, prescreen your medical issues and based on how each carrier looks at specific issues help you pick the plan which considering all factors will be your best fit. They will help submit the application and assist in tracking the application thru the underwriting process.  For assistance from an advisor to help you pick appropriate life insurance in Houston give us a call. All of this, as I said before is done at no cost to the individual health insurance plan client. Thus, you get all the benefits and it costs you nothing. That is because the insurance companies pay us as agents to provide these services to you.