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SPECIAL ADVERTISING SECTION
Insurance: The Financial Lubricant of Free Enterprise 
Did you know that for the last two years the insurance market in Russia has had back-to-back 50% increases. Why? Because what was state property is now becoming individual private property and people want to protect their new freedom to own. Without insurance we would be reluctant to: • Drive a car (What if I have an accident?) • Own a home (I'd be devastated if it burned down.) • Get married, have children or not... (I might become disabled, I will grow old and die.) We may not realize it but we really love insurance. It makes you free to be you, to earn a living, to own property and to protect that property. LIABILITY INSURANCE What is the hottest thing in Homeowners, Renters and Auto Insurance? It is Liability Insurance! Why? The liability insurance under those policies may be inadequate to do the job. The answer is an Umbrella or Comprehensive personal liability policy because it: • Provides lots of additional protection at low cost. • Fills in missing areas in the other policies like certain liability exposures not covered under those policies such as personal injury, invasion of privacy, and liability for any property borrowed and in your care, custody or control.
Disability insurance has gotten more focused on loss of income rather than loss of ability. Many more people lose various abilities over time than lose income and loss of ability policies became very expensive. Disability policies focused on loss of income have become less expensive. Career women have found this new policy design much more appropriate for their needs and much more affordable. A 1999 Labor Department survey points out that women working outside the home are three times more likely to miss work because of a disability, including maternity leave, than men. Another aspect of disability insurance that should be investigated by business owners is Disability Overhead Expense which reimburses you for covered overhead expenses that continue during a period of partial or total disability. Ways for people to reduce the cost of disability insurance: • Instead of lifetime benefits, choose benefits for a more limited period of time, such as to age 65, or even for as short as five years. • Accept a smaller monthly benefit. • Limit the options. • Extend the 90-day waiting period. • Take advantage of all discounts available. For example, getting colleagues to sign up so the employer can deduct premiums from paychecks could save up to 20%. Long-Term Care Insurance (LTC) Today, a cost efficient and easy way of getting extra coverage for those dreaded "what ifs" is employer-sponsored LTC plans. They are less expensive, more tax efficient and allow your spouse, parents and children to buy also. Marriage and Long-Term Care Marriage, among other things, means the acceptance of another person's liabilities. You probably have a friend or relative who has been a caregiver to a spouse and who is now a survivor. Someone new comes into his or her life and they are, once again, contemplating marriage. Long-Term Care Insurance is not a "one-size-fits-all" product. Before you get a quote, you need to work with a pro to analyze your circumstances and see how much coverage you actually need. Then you can compare various products "apples to apples." A well-chosen long-term care insurance plan can save you thousands of dollars in premium expense each year -- and hundreds of thousands in future care expenses -- plus stress and strain on spouse and family. Annuity Income The "Buy a Pension" Alternative to Long-Term Care Insurance Annuities can provide another alternative to Long-Term Care Insurance. Mary is age 75 and is living comfortably on her income of $30,000 per year but there is no room for inflation or for paying the $2,000 or more per year for a long-term care insurance policy with a benefit of $100 per day that she feels she must have. The solution to Mary's problem could be to use some of her CD money (interest rates are lousy) to buy one of the new life annuities the insurance industry has developed. For about $200,000 Mary could buy a pension, an immediate annuity that would increase her income by almost $20,000 per year. Adding the $20,000 to her current $30,000 increases her current standard of living to $50,000 or $137 per day to have fun with or to use to pay for long-term care. Immediate Annuities The New Bond Alternative Today fewer employees have pension plans, more of us are living longer and because of the volatility of the stock market more of us are "buying" pensions. Having money left over at the end of life is not a problem. Having life left over at the end of money is a problem. Consider taking a piece of your portfolio and buying an immediate annuity. The contract reads that if I die the income is to continue to my spouse or other beneficiary for life. There are all sorts of consumer-friendly options that can be built in. The bottom line is that the annuity monthly income and social security may take care of basic needs, and provide a comfortable income, so that the volatility in equity investments does not affect your standard of living. However, lifetime income is assured only if the insurance company backing your payment plan is sound. For example, Northwestern Mutual has consistently received the highest ratings for financial strength from Fitch (AAA) and Moody's Investors Service (Aaa). Ratings such as these make it easier to take a long term, patient view towards stock market investments. The NEW Life Insurance Variable Universal Life (VUL) What if you could buy one life insurance policy that would: • Insure your life and other people's lives under the one policy. • Change the amount of coverage as your needs change. • Tell the life insurance company when and how much you would like to put into the policy within certain minimums and maximums. • Tell the insurance company where to put the money within the twenty or thirty accounts offered within the contract. • Change your asset allocation without extra costs or income taxes. • Get the money out of the policy for the kid's college education without having to pay income taxes. • Put it back later so you can use it again if you wish for retirement. • Or just pass it all on to your beneficiaries free of income taxes. You can do all of that and more with a properly structured VUL. VUL is a security product that tells you about every charge made within the product: Front loads, back loads, administrative expenses, cost to manage the various sub-accounts, maximum charges, and charges in case the insurance company guarantees are too generous. Don't let these charges consume your whole first year contribution which could happen if you to put too little money into the contract. Put the money in the most volatile sub-accounts and account values will be volatile. Put the money in the less volatile or guaranteed interest account and they will be less volatile. The flexibility of VUL gives you the capability of doing a great deal more than your father's life insurance policy ever did. This special section was written by Ben G. Baldwin Jr., CLU, ChFC, CFP. He has also written The Complete Book of Insurance, The Life Insurance Investment Advisor, 1988, The NEW Life Insurance Investment Advisor, 1994 and The NEW Life Insurance Investment Advisor, Second Edition. |
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