ckingins's blog

What about Annuities in these crazy times?

2008-09-30T12:00:56-05:00

Can it get much crazier? If you’ve never considered an annuity for anything before, you should consider it now.

An annuity is actually an insurance product that gives people a
guarantee on their investment. At least the fixed annuities and fixed
indexed annuities do. The stock market is a scary place to have your
money these days, especially if you saw the Dow drop nearly 800 points
Monday! It didn’t plummet that much after 9/11, which doesn’t make me
feel very good.

Annuities are life insurance products that guarantee your principal.
Fixed annuities will make the commitment. The variable annuities
won’t, as they are directly invested in the stock market. If you are in
your 20s and 30s, you may not mind the loss because you have time to
make the money again or wait for the market to rebound. Not that it did
after the mess of 2000, but it could.

But if you are in your 40s and up, we baby boomers aren’t going to
have the time to re-save. I’ve moved a good part of my money into
annuities over the past 3-4 years. There are different kinds, with
different time frames, it is not a one size fits all product. Talk to
your insurance or financial advisor to see if this if an annuity might
be a suitable direction for you to go. I use them for people that have
left jobs and don’t want to leave their 401k or 403b behind. But they
don’t have the stomach for the stock market. The other plus on this is
that when you leave an employer sponsored retirement plan is that you
will be starting an IRA. The main reason to move your old retirement
plan is that if something happens to you, ODDS ARE THAT YOUR
BENEFICIARIES WILL GET THE ENTIRE AMOUNT AT ONCE! Talk about ugly tax
consequences.

By moving it into an IRA, whatever the vehicle, an annuity or
whatever, you and your beneficiaries retain control and the money can
be taken out over time. This is referred to as a ’stretch’ IRA and you
need to know about this.

If you are concerned about the stability of insurance companies,
especially after AIG being ‘bailed’ out, or rescued, or ‘whatevered’,
what you need to realize is that the insurance segments of AIG are
sound. There are reserve requirements of 103% of the face value of
policies that must be held, not flying around. What got them in trouble
was poor investing by their other business units. Remember, in 1929,
the banks went under. The insurance companies held strong.

So take a deep breath and hang on. It’s going to be a bumpy ride!

Colleen King

Life Insurance as ‘Mortgage Protection’ insurance--a 'so-so' way and a much better way to do this.

2008-09-10T23:52:21-05:00

Life insurance is life insurance, right? Many times yes, but with
the right type of life insurance your mortgage will be protected in a
way that affords your survivors more options.

Have you gotten a mortgage or refinanced a loan lately? About 20
minutes after the close, you started getting things in the mail
offering crucial, vital protection that was absolutely essential to
your existence and the existence of your family as well the
continuation of liberty and freedom in America. Geez, when you put it
that way........

Often is it offered by an affiliate of the company you did your loan
through, but also insurance agencies that do this type of coverage buy
information and seek out public records when a new loan or re-fi
closes. The idea is that you fill out the card, mail it then get a call
to set an appointment. You can do that and meet with the agent, but
there are some definite questions you need to know to ask.

Generally what is being offered is called 'decreasing term' life
insurance. What you are buying is a term policy that is meant expressly
to pay off your mortgage, it's not a fixed, static amount. So, as your
mortgage balance decreases, so does the amount the policy will pay if
you pass away. If you are buying with a spouse or partner and you both
apply, you are really paying two premiums and getting one policy, with a death benefit that decreases over time. AND, if you sell your house, usually the policy is attached to the house so you end up starting over if you are buying another home.

What about this scenario--one of you is working, the other isn't.
The working spouse dies. You have other bills, and now a loss of
income. What do you do? Well, the decreasing term life policy will pay
off your mortgage, but what about other expenses?

By using a regular term life insurance policy, either 20 or 30
years, you control what happens to the money. You can now address other
bills and have a financial cushion. Maybe you do want to pay off the
house, and you can, but what if you are now going back to work and
would like the mortgage interest expense as a deduction? This is one of
the things I mean by having control over your situation. If two people
are insured, you have two level premium death benefits (meaning the
value doesn't drop over time). And if you move, the policy goes with
you.

Optimally, you look at an amount that will pay off the mortgage, put
all kids through a four year college program and take care of a
majority of the remaining partner's living expenses. That can end up
being expensive, and you don't want to buy insurance that breaks you.
Once we look at rates, then we go 'backwards' and see what death
benefit amount is affordable. After all, having something is better
than nothing, because it will give your survivors time to grieve and
deal with things. And not have to make difficult financial decisions at
a terrible time.

Some people if they are younger will opt to add on a 'return of
premium' rider. If you are alive at the end of the term of the policy,
they will return 100% of the premium to you. No interest of course, but
at least you get it back. Agents are divided on whether this is a good
thing to recommend or not. I suggest it, but don't push it, because
ultimately my clients are calling the shots.

So basically, when you have people depending on you financially,
whether you want to call this mortgage protection, life insurance or
just good old peace of mind, seriously consider looking at it. Be well!

Health Savings Accounts–I don’t get it, please explain it

2008-07-17T23:03:08-05:00

Health Savings Accounts (HSAs) have been around since 2004 and grew
out of the Archer Medical Savings Account pilot. Initially, there
weren’t a lot of trustees that handled HSAs. But NOW, four years later,
since people have figured out there is money to be made, most banks and
more credit unions are offering them as well as private companies
focusing primarily on administering health savings accounts.

In order to be eligible to open an HSA, you first have to purchase a
qualified high deductible health plan. Not just any high deductible
plan is eligible. Basically when you look for these plans, they will be
identified as ‘HSA eligible’ or ‘HSA compatible.’ Generally the only
benefits you will have available prior to meeting the deductible are
preventive. But check the plan outline, some don’t (most do).

You will have a deductible to meet, and then your coverage kicks in.
Either you will be covered 100% because your out of pocket maximum has
been met, or the insurance company will start to pay part, and you will
pay part until you meet the out of pocket maximum. If you’re enrolling
a family, whether just a husband and wife or husband, wife and kids,
then you are looking at a family deductible and family out of pocket
maximum. These numbers are generally double the individual numbers.
That might sound daunting, but when you look at regular PPO plans,
usually two individual deductibles and two individual out of pocket
maximum. Some will have aggregates where the family expenses are
combined.

But when you look at an HSA eligible plan, the total out of pocket
expenses may end up less. You have to look at the specific plans to see
that. And if you’re a resident of California, feel free to call or
email me to look at these. Colleen@ckinginsurance.com

Where the HSA comes in, is this is money you put aside for your
qualified expenses–medical, prescription, even dental and vision
regardless if you have dental or vision coverage–doesn’t matter. Why
these are becoming so popular is that you decide how much to put into
the account, up to the annual limits. For 2008, you can deposit up to
$2900, and for a family plan $5800. And there’s a make up contribution
if you’re over 55! The best part? Anything you deposit into an HSA is deductible on your Federal tax return
(we’re still working on it being deductible on the State return.) And
at the end of the calendar year, it’s not ‘use it or lose it’ like you
see with things like flexible spending accounts. It’s YOUR money, it
rolls over to the next year.

Where I lose some people, is the idea that they are buying
insurance, and yet still paying for a lot of their expenses–what good
is insurance? Well, if something big happens, you’ll blow through your
deductible in a heartbeat–I used to be an emergency nurse, trust me.
The monthly premiums for an HSA eligible plan tend to be less than
other plans. THAT’S another huge attraction.

So, look at HSA eligible plans in order to save on insurance
premiums. (You aren’t obligated to open an HSA just because you have an
eligible plan–no law requiring that!) Then, start your HSA to gain
another deduction and pay for your expenses with ‘pre tax’ dollars. HSA
eligible plans are available in both the individual and group health
insurance arenas.

More on this later, so please check back–Be well!