FREQUENTLY ASKED QUESTIONS ABOUT INSURANCE & ANNUITIES
What type of policy should I buy – term or permanent?
It is impossible to say which is better because the kind of coverage that is right for you depends on your unique circumstances and financial goals. Generally speaking, term offers the greatest coverage for the lowest initial premium and is a great solution for people with temporary needs or a limited budget. Permanent insurance may make more sense if you anticipate a need for lifelong protection and like the option of accumulating tax-deferred cash values. Also, it does not have to be either one or the other. Oftentimes, a combination of term and permanent insurance is the right answer.
Will I have to be examined by a doctor to buy life insurance?
Rules vary from company to company and for different types and amounts of insurance. For very small amounts of insurance or association or group plans, no exam usually would be needed. However, those who have health issues or request larger coverage amounts may be required to have a basic medical examination. The exam is usually paid for by the life insurance company and takes around 25 minutes at your home or office.
Can I buy life insurance over the internet or by telephone or mail order?
No company, online or in person, can you charge you less money for the exact same policy as Abrams Insurance Solutions. We provide you with the best of both worlds: online quoting and personal service available by phone, email, or in person to answer your questions.
How might my smoking affect my ability to buy life insurance?
If you are a smoker, you should expect to pay a little more for your life insurance than a non-smoker of a similar age and health. Of course, if you also have a smoking-related medical condition, then the life insurance company would take that into consideration when deciding whether to sell you life insurance and what rate you should be charged. Occasional cigar-smokers may still be charged nonsmoker rates.
How do I protect my family from losing our house if I die while still having a mortgage to pay?
The preferred way to cover this need is to purchase what may be described as a “decreasing term insurance policy”. Most insurance companies offer a variety of such policies including ones that are specifically tailored to match the declining principal balance of your particular mortgage. Mortgage companies also frequently have agreements with insurers to provide mortgage insurance.
What if I become disabled or unemployed and cannot pay the premium?
Some policies include provisions that will waive the premium payments during a period of unemployment or disability. If a policyholder has selected the automatic premium loan provision, a loan would automatically be taken against the cash value of the policy to pay the premium in the event the policy was about to lapse for nonpayment of premium. This would prevent loss of the insurance protection as long as the policy has enough cash value to pay the premium.
Annuity & CD
How does the law protect annuity investments?
In order to safeguard the funds of annuity contract holders or policy owners, State Laws demand the insurance companies to meet strict financial requirements. According to these legal financial requirements, the insurance companies are legally bound to set up a reserve, which at all times must be equal to the withdrawal or surrender value of their total block of annuity policies or contracts, i.e. the annuity providing insurance companies must set aside funds equal to the surrender value of every annuity contract in force. Additionally, the state laws also require certain levels of capital and surplus to further protect the annuity holders or policy owners.
How many types of Annuities are there?
Broadly there are two classes of annuities: immediate annuities and deferred annuities, and these two classes have various sub classes including fixed deferred, variable, and equity-indexed annuities.
What is an immediate annuity?
The annuity in which the benefit payments begin very quickly, normally within one year of the time it is purchased, is termed as an immediate annuity. An immediate annuity is commonly purchased with a single premium.
What is a deferred annuity?
The annuity in which a policy holder pays a premium to the annuity providing insurance company that issues a contract promising to pay interest or gains made on the deposit while deferring the income and the taxes until you actually withdraw the money or begin receiving an income. Three major types of deferred annuities are Fixed Deferred annuities, Equity-Indexed annuities, and Variable Annuities.
What is the death benefit on a fixed deferred annuity?
The death benefit on most fixed deferred annuities is equal to the full contract value, i.e. premium plus accrued interest compounded annually and credited daily minus any prior withdrawals, calculated as of the date of death.
What is the death benefit on an equity-indexed annuity?
The death benefit on most equity-indexed annuities is equal to the full contract value, i.e. premium plus accrued gains compounded annually minus any prior withdrawals, calculated as of the date of death, or in some cases, as of the last contract anniversary.
What are “qualified” and “nonqualified” annuities?
Qualified annuities are sold as part of a tax-qualified plan such as an IRA, Keogh, SEP, or company pension plan, and Nonqualified annuities are not used to fund a tax qualified plan such as an IRA, Keogh, SEP, SEP IRA, or TSA.
What makes annuities different from other investments?
Their tax deferred status, the avoidance of probate, and the promise of guaranteed income for life make annuities different from other types of investments.
What is tax deferred status of annuities?
The tax deferred status of annuities means that an annuity holder defers the income and the taxes until he/she actually withdraws the money or begins receiving an income.
What is probate and why do people prefer avoiding it?
Probate is a judicial process to establish the validity of a will. The process of Probate can delay the passing on of assets to heirs. Assets in an estate are subject to probate and can’t be passed on to heirs unless the probate court can certify the validity of the will and authorize the executor to execute the will.
People avoid “probate” because the judicial process can take anywhere between six and twelve months to conclude, and the legal expenses can be significant. Annuities and life insurance policies are not subject to probate and may be passed to a designated beneficiary directly without going through probate.
How are Market-Linked CDs different than traditional CDs?
Market-Linked CDs are basically the same as traditional CDs: issued by banks, 100% principal protected when held to maturity and FDIC insured up to the statutory limits. However, the difference is in the ability to earn enhanced returns with Market-Linked CDs. Market-Linked CDs can offer clients access to a wide range of markets such as US and international equities, commodities, and foreign exchange by linking the returns on these CDs to the performance of these asset classes. This provides the opportunity to earn much higher rates of return on Market-Linked CDs.
Long Term Care
Why are most people unprepared for the cost of an average long term care stay?
The average stay is 3 years and the average cost is about $60,000 to $100,000 per year. Fewer than 20% of those that need long term care are able to cover the cost for just one spouse, let alone both … The reality is that most people cannot save enough.
What exactly does long-term care insurance cover?
It all depends on the type of plan you choose to purchase, but long-term care insurance covers skilled and custodial services in a variety of settings, including in-home skilled and custodial care, adult day care, assisted living facilities, nursing home care and Alzheimer’s centers.
How do I qualify for long-term care insurance?
Long-term care insurance is underwritten according to your medical history and current health status. When you apply, you must also be able to perform all of your ADL’s including bathing, dressing, eating, toileting, continence and transferring.
Isn’t long term care insurance very expensive?
Like life insurance, the younger you are when you add this benefit to your financial plan, the less expensive it is. Your age at the time you purchase the insurance is the primary factor in determining your cost for a basic policy. The cost increases depending on whether you choose to add optional benefits to the basic policy or if you choose to increase your benefit over time to account for inflation.
If I need long term care I will not want to be placed in a nursing home. Can I avoid being placed in one?
Long term care insurance can help you stay in your home or in the home of others, such as the home of a friend or relative. For example, you can use your daily benefit to help you pay for services such as home health aides, caregiver training, and adult day care. Should your needs increase, you can then apply your benefit toward an assisted living facility or a nursing home.
What is Co-insurance?
The amount you are required to pay for medical care in a fee-for-service plan and certain managed care plans after you have met your deductible. The coinsurance rate is usually expressed as a percentage. For example, if the insurance company pays 80 percent of the claim, you pay 20 percent.
What is copayment?
Copayment is a way of sharing medical costs. You pay a flat fee every time you receive a medical service (for example, $30 for every visit to the doctor). The insurance company pays the rest.
What is deductible?
The amount of money you must pay each year to cover your medical care expenses before your insurance policy starts paying.
What is the difference between a Primary Care Physician (PCP) and a specialist?
A Primary Care Physician, or PCP, is the doctor you would go to on a regular basis, such as when you’re simply not feeling well, or have an ear ache or the flu. A specialist is a doctor that your PCP might refer you to if the problem you have requires a doctor with more experience in a certain area.
What is maximum out of pocket?
The maximum amount of money you will be required pay each year for deductibles and coinsurance. It is a stated dollar amount set by the insurance company, in addition to regular premiums.
What is considered a pre-existing condition?
A pre-existing condition is any health condition you have or have had prior to applying for a health insurance policy.
What is HIPAA?
HIPAA stands for the Health Insurance Portability and Accountability Act, which is a law mandating that anyone belonging to a group health insurance plan must be allowed to purchase health insurance within an interval of time beginning when the previous coverage is lost regardless of current health status.
When should I purchase disability insurance?
You should purchase it as soon as you can. There are several reasons not to “put it off until later.” The most obvious reason is the cost of coverage will increase as you get older. If you are earning an income, you need to protect it now. Also, if you are currently in good health, you should have no difficulty qualifying for a policy. However, if your health declines or if you experience a disability, you may no longer be insurable (if you are still insurable, it will certainly be at a higher premium).
What is the benefit level and period?
Disability policies usually pay 40% to 65% of your pre-disability earnings at the time of purchase for a specified period of time. That period may run from one to five years, until age 65, or in some cases, for life. Since disability benefits are designed to replace the income you would otherwise earn by working, most people do not need benefits extending beyond the working years. Electing shorter benefit periods can save premium dollars. But bear in mind that a lengthy disability threatens your financial security more than a short-term disability.
What is the definition of disability?
Some policies pay if you are unable to perform the duties of your own occupation; others may pay only if you cannot work at any occupation for which you are reasonably qualified. In addition, some policies pay only for disabilities arising from an accident. However, illness is the most common cause of disability (about 90%), and is more likely as you grow older.
What is the elimination or waiting period?
There usually is a waiting period, known as an elimination period, before benefits kick in. It is typically 30 days, 90 days or six months after a disability occurs. You can select the waiting period when you buy your policy. Opting for a longer waiting period will save you money.
What is extent of disability?
Some policies pay only if you are totally disabled. Others cover partial disability for a limited time, but only when it follows a period of total disability for the same cause.
What is guaranteed renewable?
This is one of two major types of disability policies. It means your policy cannot be cancelled as long as the premiums are paid. Premiums can be raised for an entire class of policyholders but not for reasons related to your individual circumstances.
What is non-cancelable?
This is the other major type of disability policies. These policies can never be cancelled as long as premiums are paid, and premiums are guaranteed not to increase.
What is portability?
Portability refers to whether or not you can take coverage with you. One of the biggest advantages of owning an individual disability policy – or purchasing disability coverage through your employer on a voluntary basis – is that it is completely portable. You own it and it follows you even if you change jobs. By contrast, traditional employer-sponsored group coverage is almost never portable.
What is inflation protection?
You can add a cost-of-living adjustment to a policy that increases by a specified percentage after each year of disability. Though expensive, this option can be vital to maintaining your standard of living if you are out of work for a long period of time.
What is presumptive disability?
Even if you can still perform some or all of your regular job responsibilities, you are presumed fully disabled and are entitled to full benefits under specified conditions, such as loss of sight, speech, hearing, or loss of limbs.
What are residual benefits?
If you are unable to perform some aspects of your job, residual benefits allow partial disability payments based on your loss of income.
How much disability coverage should I have?
You should have enough coverage to maintain your current lifestyle until you are able to return to work, factoring in all other sources of income (group disability policy, investments, etc.).