Answers to common questions about insurance

Insurance is one of the fundamental financial tools for any household. Most people recognize the important role of insurance, but many are unsure about how it works. If you have questions about insurance, you aren’t alone. As a financial advisor, I get a variety of questions about insurance. Here are some of the most common:

Q

: I usually just renew my policies every year. Is there any need to worry about making changes?

A

: Just as your life can evolve over time, your insurance needs may change as well. Consider reviewing your insurance coverage at least annually. This can help you determine if policies you currently own are cost effective and still a good fit for you. It also may help you evaluate if there are policies you no longer need and identify any gaps in coverage.

Q

: I have life insurance through my employee benefits program at work. Do I need additional coverage?

A

: It’s worth comparing the cost of that coverage with other types of options available to you. Life insurance as an employee benefit isn’t always less expensive or sufficient to cover your entire financial situation. Also, if you should leave that employer, your coverage will ultimately be lost. You’ll want enough protection in place to meet your family’s needs, particularly if your work circumstances change.

Q

: How does variable universal life differ from traditional universal life policies?

A

: Universal life policies are permanent policies that have a savings component. In a variable policy, savings can be put to work in investments such as stocks and bonds. That creates potential to accumulate more savings, but also adds a degree of risk if your investment choices perform poorly. This may impact the premiums due or your death benefit. Some policies offer ways to lock in a guaranteed minimum death benefit.

Q

: What are riders and how do I know if I should choose any?

A

: Riders are benefits you can add to your policy, usually for an extra cost. With life insurance, they can range from having the option to have premiums waived in certain circumstances (such as being unable to work due to a disability), the right to claim an accelerated death benefit if you should become terminally ill, a return of premium if you don’t die within the term of the policy, and even coverage for long-term care

When you retire, you’ll likely no longer need to maintain disability income coverage. And, depending on your level of wealth, you may want to consider incorporating life insurance into your estate plan.

n eeds. Your unique circumstances and priorities can help you determine if any riders are right for you.

Q : What is disability income insurance and how does it work?

A : This is an important form of coverage that provides a stream of income if you are unable to work for an extended period of time due to injury or illness. It is designed to replace a portion of your income to help meet your living expenses while you are unable to work. This can be vital not only to pay bills, but also to keep your long-term financial goals on track. Policies typically include a waiting period of 90 days between the time you stop working and when income payments begin.

Q : How might my insurance requirements change later in life?

A

: You’ll want to consider different strategies as you grow older. Long-term care insurance may be worth considering when you are in your 40s or 50s to help deal with the rising costs of extended care as you age. When you retire, you’ll likely no longer need to maintain disability income coverage. And, depending on your level of wealth, you may want to consider incorporating life insurance into your estate plan.

Insurance is a critical component in your overall financial plan. Talk to your financial advisor and insurance specialist to review your current coverage and determine how you might be able to upgrade it or incorporate more cost-effective solutions.

Bronwyn L. Martin is a Financial Advisor Chartered Financial Consultant with Martin’s Financial Consulting Group, a financial advisory practice of Ameriprise Financial Services Inc. in Kennett Square and Havre de Grace, Md. She specializes in feebased financial planning and asset management strategies and has been in practice for 18 years. To contact her visit www.ameripriseadvisors.com/bronwyn.x.martin