Month: April 2023

In general, you purchase your life insurance policy many years before the payout of the death benefit. But inflation can have a negative impact on the actual purchasing power the payout will give your beneficiaries. In this blog, we’ll discuss how you can protect your life insurance benefit against inflation.

Inflation, Purchasing Power, and Life Insurance Payouts

The inflation rate in the U.S. is typically around 3.8 percent. When inflation rises, it means your purchasing power—the amount of products or services you can buy per dollar—diminishes. In other words: Your money doesn’t go as far year over year.

However, in 2022, the rate of inflation was 6.4 percent. That’s significantly higher than normal and had an enormous impact on cost of living nationwide.

Clearly, you need to take inflation into account when buying life insurance. If you don’t, inflation will likely degrade the purchasing power of the death benefit over time. Consider the following example:

Let’s say a beneficiary of a life insurance policy receives a $200,000 death benefit in 2023. How much would the death benefit need to be to get the same purchasing power in 2050? According to SmartAsset’s inflation calculator, if the inflation rate remains at 6.4 percent, the life insurance policy payout needs to be $1,06712.

If you don’t take inflation into account, it would likely mean the actual purchasing power of the sum your beneficiaries receive is much lower than you intended when you bought the policy.

How to Protect Your Life Insurance Payout Against Inflation

Fortunately, there are several ways you can protect your death benefit against inflation:

• Cost-of-living rider: A cost-of-living rider is an addition to a life insurance policy that allows your policy to increase in value over time so it keeps up with rising inflation. After you pass away, your beneficiaries will receive a larger death benefit from the policy.
• Whole life insurance: A whole life insurance policy provides good protection against inflation because the death benefit is guaranteed to increase at a specific rate each year. The cash value of a whole life insurance is guaranteed increase at the same rate as the death benefit. That means it will also keep up with inflation. However, whole life insurance is typically the most expensive form of life insurance.
• Index-linked life insurance: Some life insurance companies offer indexed-linked life insurance, which links your premiums to factors that are inherently tied to inflation. These include the average earnings index and the consumer price index. Because your policy is directly linked to inflation, it retains its long-term cash value. Note, however, that in most cases, you need to activate this option when you purchase your life insurance policy.
• Periodic premium boosts: To boost the amount of the death benefit without having to commit to the high premiums or additional costs of the options above, you can simply periodically increase your premiums when it’s convenient for you. By doing so, you build up a larger cash value and death benefit.

Get Expert Help

It’s best to have a good understanding of all your options before choosing how to protect your life insurance against inflation. At Liberty Financial Group, our experts are standing by to give you all the information you need to make the right decision. Contact us today to learn more.

Life insurance might be one of the first expenses you want to save on during a recession. However, it can provide financial security for your dependents in the event you pass away—security they might otherwise not have during challenging economic times. In fact, considering the prevalence of job loss and inflation, having life insurance might even be more important than ever before during a recession.

Life Insurance Protects Your Dependents During a Recession

The purpose of life insurance is to provide your dependents with a death benefit that mitigates the financial impact of your death on their lives. Here’s how it can help.

Pay for Funeral Costs

During a recession, inflation generally skyrockets, which drives up the prices of pretty much everything, including funeral costs. Since funeral costs are on average between $7,000 and $9,000, having a bulk sum payout of a death benefit can certainly take some of the financial pressure off your loved ones’ shoulders.

Pay for Living Expenses

With recession pushing the cost of living up, your dependents need a financial bolster to help them simply pay for groceries, utilities, and other daily living expenses. Your death benefit can provide that extra cushion they need to get through challenging times.

Provide a Safety Net in the Event of Loss of Income

At the same time, layoffs and a constricting job market make it more challenging for people to earn a living. In the event you’re the only income-generating person in the family, your significant other or oldest children might have to earn a living. If they can’t find a job, having a death benefit can provide a safety net they otherwise wouldn’t have to get them through lean times.

The same is true for a working dependent who loses a job during a recession. When it’s challenging to land a new job, they might be underemployed or even unemployed for a while. The death benefit can help bridge them over until they can start earning a living again.

Pay Off Your Debts

If you have debts at the time of your death, your heirs inherit them. This includes everything from credit card debt and mortgages to medical and student debt. It’s almost always a great challenge for loved ones to pay off these debts without having a life insurance policy to fall back on. So if you have any debt at all and want to protect your loved ones from the immense financial burden of paying them off, make sure to get sufficient life insurance coverage.

Life Insurance Always Provides a Safety Net

Generally speaking, there’s more at risk for your dependents in the event you pass away during a recession compared to during an economic upswing. That’s why it’s wise to make sure you purchase life insurance as soon as you have any debt and/or dependents.

At Liberty Financial Group, we can help you find the best life insurance coverage for the right price. Contact us today for a personalized quote.

If you’re reading this blog, congratulations! That means you’re on the right track to take care of your loved ones in the long term. In this blog, we explain that your circumstances are just as important as your age when it comes to buying a life insurance policy.

When Do You Need a Life Insurance Policy?

When you purchase life insurance, you agree to pay a life insurance company a certain premium per year in exchange for a lump sum death benefit—or cash payout—when you pass away.  The purpose of this death benefit is to provide financial support for your dependents and/or whomever will inherit your debt.

Of course, it’s also possible to buy a policy if you don’t have any dependents or debt and then leave the death benefit to a beneficiary of your choice. However, for the purposes of this blog, we’re only going to consider cases in which you actually need a life insurance policy.

So what types of situations are these?

• If you have debt that your parents have co-signed, such as a student loan or a car loan.
• If you have debt that your significant other has co-signed or would inherit upon your death, such as a mortgage, car loan, or personal loan.
• If you have credit card debt.
• If you have dependents who rely on your income, such as children, a non-working spouse, or an elderly or sick relative whom you support financially.

After you pass away, your death benefit will be the first line of defense for your dependents or heirs. Without it, heirs are liable for your debts after your assets have been liquidated, and dependents are stuck without an income.

For example, without life insurance, your parents who co-signed your car loan would have to simply pay off the balance themselves. Similarly, if you don’t have life insurance, there’s no death benefit for your spouse to pay off your credit card bills and mortgage. Or if you have children, your significant other would be entirely responsible for their health, wellbeing, and education.

The Best Age to Purchase Life Insurance

Clearly, there’s no pre-determined age at which you should buy a life insurance policy. Nonetheless, as a rule of thumb, if you’re going to buy one, the younger you are when you do so, the better. Life insurance becomes more expensive each year you grow older because there’s more risk of you developing health conditions and passing away. So if you buy a policy when you’re 25 and healthy, it will cost far less than when you’re 35 and have pre-diabetes.

Contact Us for More Information

If you’re interested in purchasing a life insurance policy, it’s best not to go it alone. Our team here at Liberty Financial Group can provide you with objective advice as to the best policy for your situation. Contact us for more information.

Sources

https://www.investopedia.com/articles/investing/072816/what-best-age-get-life-insurance.asp

https://www.experian.com/blogs/ask-experian/what-happens-to-credit-card-debt-when-you-die/

Congenital heart disease is the largest group of all congenital diseases, impacting approximately one percent of newborns in the U.S. Depending on the severity of the condition, many babies with congenital heart disease have to undergo one or more surgeries in the first few months of their lives.

Fortunately, there are infants who go on to live into adulthood. If this is your situation you might be wondering whether you can get life insurance with a congenital heart condition.

Life Insurer Considerations

A life insurance company always evaluates the risk involved before underwriting a policy. That means—to put it bluntly—the higher the risk of you passing away during the term of the policy, the higher the premiums they charge because there’s a higher chance the insurance company will have to pay out the death benefit. In some cases, a life insurance company refuses to sell someone with a higher risk a policy at all.

So how does this tie into congenital heart disease? Basically, whether or not you’ll be able to buy life insurance depends on two factors: medical prognosis and lifestyle.

Medical Prognosis

First, what is your medical prognosis? If you had surgeries when you were a child but are able to live a healthy, normal life at the moment and your doctors have no reason to expect this will change for the foreseeable future, chances are you can get life insurance.

On the other hand, if your life is significantly impacted by congenital heart disease and your medical prognosis isn’t good, most insurance companies will not offer you a life insurance policy. The risk is simply too great for them.

However, there are some life insurance companies that offer smaller policies—for example, up to $25,000—that can help your loved ones with your final expenses or other costs after you pass away.

Lifestyle

If you’re not suffering from any negative effects of congenital heart disease but live a lifestyle that could adversely impact your risk—for example, you’re a smoker or suffer from substance abuse—then the insurance company will likely take both of those factors into account. In this instance, you’ll wind up paying higher premiums or perhaps even being refused a large policy.

Get Expert Help

If you suffer from congenital heart disease and are looking for a life insurance policy, please contact us. We will advise you on your best options, and, if you want to apply, help you throughout the application process.

Sources

https://www.ahajournals.org/doi/10.1161/JAHA.115.002846

According to a 2021 study, only 47 percent of women have life insurance coverage—compared to 58 percent of men. However, women are just as likely as men to need a life insurance policy.

Why Do Women Need Life Insurance?

Women are just as important as their spouses or partners when it comes to the contributions they make to their family’s wellbeing. They may earn an income, take care of the household and children, or both.

If those contributions were suddenly to end due to death, the remaining spouse would be left with a financial gap to fill. Having to replace a deceased spouse’s income and/or find the money to pay for childcare is no small challenge. And that’s why women need life insurance just as much as men.

Life Insurance Is More Affordable for Women

The good news for women is that it’s more affordable for them to purchase life insurance than it is for their male counterparts. Statistics show that women live longer than men and are far more likely to outlive the term length of a term life insurance policy. As a result, the cost of coverage is in many cases more affordable than for men.

For example, if you’re a 35-year-old healthy female non-smoker, the average monthly premium for a 20-year term life insurance policy with a death benefit of $500,000 could be on average $25. For a 35-year-old healthy non-smoking male, the same term life policy with the same coverage would likely cost $30 per month.

Is Group Life Insurance Through Work Enough for Women?

The short answer is no, it isn’t. While group life insurance through your job might be very affordable or even free, the coverage generally isn’t very much. On average, it’s two to four times your annual salary. But that’s rarely enough to cover the cost of your own home and whatever financial needs your children have.

On top of that, if you leave the job, you most likely won’t be able to take the policy with you.

While it’s usually wise to accept life insurance through your job, it’s also prudent to look into getting your own individual policy. That way, you can purchase sufficient coverage and ensure your policy stays with you, no matter where you work.

When Should a Woman Get a Life Insurance Policy?

It’s time to buy life insurance when you have dependents, or when your death would leave someone else saddled with your debt.

For example, if you’re pregnant or already have children, it’s wise to get life insurance to ensure there’s enough money to take care of them and pay for their education. At the same time, if you’ve bought a home, you don’t want your partner to have to sell it because they can’t afford it anymore.

On the other hand, if you bought a home by yourself, your parents could be liable for your outstanding mortgage. So it’s advisable to make sure that whoever would be saddled with your debt when you pass away is the beneficiary of your life insurance policy.

Contact us today for more information about life insurance for women.

Oftentimes, people think of life insurance as an investment in the future of their loved ones. After all, the death benefit will go to their beneficiaries after they themselves pass away.

But there’s also a form of life insurance that includes a cash value savings component that you can use for your own purposes—a cash value life insurance. Here’s what you need to know.

Cash Value Life Insurance

Cash value life insurance is permanent life insurance. In other words, it lasts for your lifetime (assuming you’re the policy holder). Unlike a term life policy, it doesn’t expire after a certain number of years. It’s important to understand that cash value life insurance is more expensive than term life insurance.

Cash value life insurance features a cash value savings component. Over time, as you pay more into the policy, the cash value builds up. It also earns interest, and taxes are deferred on the accumulated earnings. This means the cash value builds up even further.

You can access the cash value at any time for a range of purposes, for example when you need to “borrow” money from your policy to finance a renovation in your home. When you borrow against the cash value, the life insurance company treats it as a loan and charges interest on the amount you haven’t yet paid back.

You can also withdraw money from the policy. However, because you won’t be paying it back, it usually reduces the amount of the death benefit.

Example of Cash Value Life Insurance

Let’s say you have a policy with a $50,000 death benefit and an accumulated cash value of $10,000. It has no prior cash withdrawals or outstanding loans.

If you pass away, the life insurance company pays your beneficiaries the $50,000 death benefit. And considering that the cash value is $10,000, the real cost to the insurance company is $40,000.

Pros and Cons of Cash Value Life Insurance

There are advantages and disadvantages to cash value life insurance.

Advantages include that it’s permanent life insurance, you can borrow against the cash value, and you can withdraw from the cash value in a tax-advantaged way.

The disadvantages include that the out-of-pocket premiums are more expensive, any withdrawals reduce the death benefit, and any unpaid policy loans with interest are also deducted from the death benefit.

Get Expert Advice on Cash Value Life Insurance

When deciding whether or not cash value life insurance is right for you, it’s advisable to seek out the advice of an independent, expert life insurance broker. Here at Liberty Financial Group, we can objectively advise you on your best options. Contact us for more information.

If you want to take care of your loved ones in the event you pass away, you’re going to need to purchase life insurance. An independent life insurance broker can help you find the right policy for your needs.

What Is a Life Insurance Broker?

A life insurance broker is a professional who works with you to find the coverage you need at the right price. Instead of working for one specific life insurance company, they help you assess quotes from multiple life insurers so you can find the deal that works best for you.

The Difference Between a Life Insurance Broker and a Life Insurance Agent

So how are a life insurance agent and a life insurance broker different?

A life insurance broker is an independent professional who isn’t employed by a specific insurance company. That’s why they can help you objectively compare quotes from different insurers.

In contrast, a life insurance agent sells policies from the life insurer or insurers they work for. As a result, they offer fewer choices because they’re only able to offer the rates and policies offered by that specific company (or those companies).

The Value of Working with a Life Insurance Broker

Working with a life insurance broker offers several distinct benefits:

• They help you determine the type of policy you need. It can be complicated to determine what type of policy you want—term life, whole life, etc.—and how much coverage you need. A life insurance broker evaluates your financial and personal requirements and offers advice on what type of plan best fits those needs.
• They request quotes from multiple life insurance companies and compare them for you. This saves you a lot of work—plus, you can rest assured a seasoned professional is assessing the various offers for you.
• They can streamline the application process. You only have to submit your information once, and then the broker will use it to apply for policies from multiple insurers. In contrast, if you apply by yourself, you have to fill out your information for each application you make.
• They can advise you throughout the application process. You’ll have to submit certain forms and undergo a physical examination to qualify for a life insurance policy. A life insurance broker can help answer any questions you might have along the way and support you throughout the process.
• A life insurance broker can remain your point of contact. This can be helpful if you’re looking to add riders or increase your coverage in the future.

Contact Us for More Information

At Liberty Financial Group, we work for you—not for the life insurance companies. That’s why we can offer you the best advice regarding the right policy for you. For more information, please contact us today.