RJS 9-6-25

Episode Transcript

Speaker 1 (00:00):
Good morning to all. Craig Schillig here and this is
Safe Money. I'm here every Saturday to talk with our
listeners about financial strategies we use to manage and protect
assets safely. I've been an insurance agent for over twenty
four years. During that time, I've learned a few insurance strategies,
like using annuities as safe money harbors, or using cash

(00:23):
value life insurance to supplement retirement income. Just a reminder,
you can call our office at five six three three
three two two two zero zero if you'd like to
enroll into one of my virtual Medicare community meetings I
give two every month via zoom, or you can email
me at Craig at Craigshillig dot com. And that's my name,

(00:46):
cr Aig at cr AI G S C h I
l lig dot com. Today I'd like to talk about
life insurance. September is Life Insurance Awareness Month, so let's
do life insurance one on one. No one really wants

(01:10):
to think about life insurance, but if someone depends on
you financially, it's a topic you can't avoid. Getting life
insurance doesn't have to be hard or boring. I have
some answers to common questions about life insurance so that
you can make informed decisions about protecting your loved ones financially.

(01:30):
Why is life insurance worth it? There are many answers
to the question of why is life insurance important, but
by and large, the most important one is ensuring your
family's financial security and peace of mind. If anyone depends
on your income, they would most likely struggle if you
were to pass away. That's why life insurance is so

(01:53):
important to have. There are different types of life insurance policies,
but essentially they all pay cash to your loved ones
when you die. Money from life insurance can be used
to cover daily living expenses, a mortgage or a rent payment,
outstanding loans, college tuition, and other essential expenses. Life insurance

(02:19):
is the best way to ensure that your loved ones
would be in a good financial place if you and
your income were no longer in the picture, and the
key point there is income replacement. That's probably the most
missed item in life insurance planning by most people. Life

(02:41):
insurance is absolutely essential if there's someone you care about
who would suffer if you and your financial contributions were
no longer in the picture. This could include a spouse,
a child, disabled family member, aging parent, or anyone else
who depends on your earnings to make ends meet. There

(03:03):
are several different types of life insurance, but they all
have in common. But what they all have in common
is that they pay cash to your loved ones in
the event you pass away. This lets your nearest and
dearest remain on firm financial ground even though your earnings
have stopped. From the mortgage to childcare costs to the

(03:26):
weekly grocery built, you already know what life comes. You
already know that life comes with many expenses. We all
do so much to take care of our loved ones
in the here and now, but many people don't consider
how those left behind would manage if the unthinkable were

(03:48):
to happen. Over the years, I've heard them. I've heard
from countless people who are extremely grateful to have a
financial lifeline in the form of life insurance, and I've
sadly also heard from those who didn't have life insurance
to rely on when a breadwinner passed away. Katie Miller

(04:10):
was young, she knew to plan for her family's future
with life insurance. Shortly after welcoming their second son, she
passed away from an aggressive form of cancer at age thirty.
Miranda Riviera lost her father when she was twelve with
no life insurance, and she knew nothing would be the

(04:33):
same going forward. These kinds of stories underscore just how
important life insurance is if anyone depends on you financially.
The good news is that there are life insurance policies
to fit every situation in budget, and many people are
pleasantly surprised to discover life insurance is far more affordable

(04:55):
than they imagine, and to learn that the life insurance
proceeds are almost never subject to federal income taxes. Death
benefits usually pay tax free. What's more, some policies have
also a savings component to help you grow your nest
egg in addition to protecting the ones you love the most.

(05:19):
Getting started is easy. One of the best ways is
to work with a financial professional who can walk you
through the entire process. If you don't have one to
work with, call me. I'd be happy to guide you
through it. The key is to start today, don't wait.
None of us know what our health will be tomorrow.

(05:39):
What does life insurance cover? Life insurance cover is virtual
any type of living expense. Some common expenses include immediate
expenses like your funeral or burial costs, uncovered medical expenses,
mortgage or rent payments, car loans, credit card debt, taxes,

(06:04):
estate settlement costs, income replacement? What about ongoing expenses food, housing, utilities, transportation,
health care and health insurance? What about continuing a family business,

(06:25):
future expenses, college tuition and ongoing college costs, retirement, future incomes?
Current income replacement? What about replacing the loss of a
Social Security check? Do I need life insurance? If someone

(06:47):
depends on you financially, you're most likely someone who needs
life insurance. Life insurance provides cash to your family or
loved ones after your death. This cash, known as the
death benefit, replaces your income and the many non paid
ways you support your household. Your family can use as

(07:08):
cash to pay for expenses like funeral costs, a mortgage,
college tuition, debts, and much much more. Just a few
examples of people who often answer yes to the question
of should I get life insurance? Some of those examples
include married or partnered couples. Many partners find it difficult

(07:30):
to make ends meet without the other the other earner's
income in the picture. Married or partnered couples with kids.
In addition to losing one partner's income, the surviving parent
may have to pay for childcare and more without the
other parent around to pitch in. What if you're a

(07:51):
single parent as a sole income earner for your family,
you want to think about how to replace your child's
only sources of financial support. Stay at home parents from
cooking meals to shuttling kids to school to helping with homework,
stay at home parents perform many critical responsibilities that would

(08:14):
be costly to outsource. Stay at home parents are basically
the COO of the household. They are non paid, but
in a lot of statistics they should be paid about
one hundred and eighty five thousand dollars a year. If
that parent is no longer there, how are you going
to replace that loss of use Empty nesters Many surviving

(08:42):
partners would not be able to maintain the lifestyle they
work so hard to achieve without life insurance. Think of
the Social Security check that is now lost due to
the death of a partner. So if you're married and
you both retire, you have two social Security checks. However,
if one of your partners dies now you only get

(09:05):
the greater of the two Social Security checks. You don't
get them both, that's a loss of monthly income. Retirees.
Depending on the size of your estate, your ears could
be hit with an estate tax rate of up to
forty five or fifty percent of the estate. Fortunately, a
life insurance policy can give the errors access to tax

(09:28):
freem money to pay that immediate cost and much much more.
If you're a business owner, life insurance can help your
business in many ways if you or a fellow owner
or a key employee were to pass away. A lot
of business owners may have a line of credit. In
order to get a line of credit, they usually have

(09:49):
to secure that with some sort of collateral. A life
insurance policy is a great way to exercise that collateral,
and it doesn't cost that much. It's a great way
to leverage an asset. Some banks will also require that.
What are there different types of life insurance. There's term,

(10:11):
there's permanent dividend pain whole life insurance, there's Those are
the two basics. Later in the month i'll talk about
there's also universal life invariable. But these are the two
basic types I'm gonna talk about today. Term life insurance.
Term life insurance provides protection for a specific period of time,

(10:35):
whatever that term is five, ten, twenty, or thirty years.
Term life insurance makes sense when you need protection for
a specific amount of time, for instance, until your kids
graduate from college or your mortgage is paid off. Term
life insurance typically offers the most amount of coverage for

(10:55):
the lowest initial premium. This makes this type of life
insurance policy a good choice for those on tight budgets. However,
one note with term insurance. Term insurance does not increase
in value. So if you get a quarter of a
million dollar policy now, that does not increase with inflation.

(11:15):
So if you get a twenty year term policy in
twenty years, that value is still only a quarter of
a million. It does not keep up with inflation. So
just keep that in mind. Now, if you have a
mortgage and you're paying it down, you're at one hundred
and eighty thousand now, and you're paying that down over time,
that's where a term life insurance policy comes in great,

(11:38):
because you'll know you have that much to at least
offset that collateralized loan. Permanent deven pain whole life insurance.
Permanent life insurance provides lifelong protection for as long as
you pay the premiums it also accumulates a cash value
on a tax deferred basis, which you could tap into

(12:00):
later in life to buy a home, supplement retirement income, cover,
an emergency expense, and many many other reasons. I sometimes
refer to as permanent divinine pay whole life insurance as
the Swiss Army Knife of financial products. Because of these
additional benefits, initial premiums are higher than what you pay

(12:23):
for term life insurance for the same amount of coverage. However,
the premium doesn't change and the death benefit will increase
over time. You may also want a combination policy, what
you may call a mix. Depending on circumstances and financial goals,
sometimes the combination of term and permanent insurance is the

(12:47):
best answer. Get an idea the type of life insurance
policies that could work best for you by talking to
your financial professional now. If you don't have someone to
work with, call me. I'll help you out. What is
the average life insurance costs. The price of life insurance
depends on four main factors, age, health, the type of policy,

(13:10):
and how much coverage you want to buy. In general,
you'll pay less the younger and healthier you are. Remember,
none of us know what our health will be tomorrow.
That's a big factor with life insurance. You also typically
will pay less for a term life policy than you
would on a permanent life policy for the initial premium

(13:35):
over the time value of money that can be really argued.
That said, don't let your age or health status discourage
you from considering life insurance. There are policies available today
for people of any age, as well as those with
certain medical issues. Just know that some of those issues

(13:59):
you may have to pay higher premium or have a
rated policy, or if you smoke, depending on chronic conditions. Now,
remember they don't accept everybody, but there are still some
guaranteed life insurance products out there for people that have
high blood pressure, diabetes, chronic conditions such as that. So

(14:28):
here's a working idea of what life insurance costs. A
healthy thirty year old can get a quarter of a
million dollar twenty year level term policy for fifteen to
twenty seven dollars a month if they are of general
good health. That means if you appurchase that policy and
pay the fifteen a month without fail, your loved ones

(14:49):
will get two hundred and fifty thousand dollars. If you
were to die at any point during those twenty years.
Also throw out another note about term insurance. Buy convertible
term insurance that you could turn into permanent whole life dividend,
pain and insurance later in life. By buying a convertible policy,

(15:11):
your past medical history will not be counted against you.
You could change that policy to permanent later in life,
and you just have to write a check. It doesn't
matter how your health status has changed over that time period.
How much life insurance do I need? The amount of
life insurance to buy depends depends on who you want

(15:33):
to protect financially and for what period of time. For
a general idea, you would add up the immediate, ongoing
and future expenses your family or loved ones would incur
if you were to pass away. That could be everything
from funeral costs to rent or mortgage, college tuition, and

(15:54):
income replacement. Add up the financial resources your loved ones
already have That could mean income life insurance that's already
in place. You would subtract the financial resources from the
anticipated expenses. The difference between the two numbers is the
approximate life insurance to buy. An easy rule of thumb

(16:17):
would be ten to fifteen times your gross income. But
many people need even more than that, and that's why
you got to talk to a professional. And sometimes it
can be twenty or twenty five times your gross income. Now,
it does depend on certain requirements, but a doctor, lawyer,

(16:43):
or a white collar executive who earns a lot of
money now may need more insurance than someone who's recently
out of college due to just liabilities and or if
they own a business. Who can be a beneficiary? Typically

(17:05):
anyone uh a life insurance beneficiary can be a person,
a trust, a charity, or in a state that gets
a payout. Now, there's issues when we're naming a minor
as a beneficiary, so you've got to be careful with that.
Naming a charity, you usually need their tax id, and

(17:31):
you got to be careful with living leaving life insurance
to an estate, So talk to your attorney or account
about that. The process for getting life insurance, you would
apply for life insurance. You got to fill out an application.
This is this process is called underwriting. Underwriting is when
your insurance risk is evaluated. Most companies today use some

(17:56):
sort of algorithmic underwriting process that can speed up qualqualification
and gets you an answer fairly quickly. Approval and costs
are based on your risk class. There are two types
of underwriting, traditional and simplified underwriting. Simplified underwriting is sometimes
called guaranteed issue underwriting. In traditional underwriting, you fill out

(18:18):
an application and typically undergo a short medical exam, maybe
a financial history. Sometimes they want a blood or urine test,
a run on a treadmill. It just depends on what
type of how much you're looking at. The more you're

(18:38):
asking for, the more requirements you're going to have. In contrast,
simplified underwriting is usually a quick life insurance application that
does not require much or any of a medical exam,
and you'll probably get an answer instantaneously. However, the coverage
amounts on these are normally limited, and the on these

(19:00):
are going to be much more expensive because they take
a certain block of people, So in exchange for qualifying
for this, you'll normally have a lower amount of insurance
with a higher premium. How often should I review life insurance?

(19:21):
As a general rule, it's a good idea to at
least go over this once a year, or whenever a
life change happens. You get married, you get divorced, you
have a baby, you started a new business, you're going
to retire, just to name a few. That's always a

(19:43):
reason to readjust and or look at your life insurance
as you go through. As you age through life, you
will need more and more life insurance. Don't forget that
you need life insurance even in retirement. Having just your
assets is not enough. If you have too many assets,

(20:04):
then you need life insurance to offset a state tax.
But then there's also living benefits of life insurance. If
you would become terminally ill or injured, there are benefits
in life insurance that will pay the premium for you,
or if you have some sort of chronic condition or

(20:24):
long term care need. That's one of the greatest benefits
of life insurance these days is getting a life insurance
policy with a long term care or chronic conditioned writer.
That means you can use it not just for life insurance,
but you could also use it later in life for

(20:44):
custodial care so that you don't have to go to
a nursing home. This is different from a long term
care policy, but a long term care writer or a
chronic condition writer allows you to use your life insurance
policy just like a long term care policy to access
funds to pay for custodial care. And that is a

(21:09):
great way to leverage an asset because oh that's right,
someday you're going to die anyway, it'll still pay a
death benefit. It's a great way to leverage an asset.
It's a great use of dollars. And I'm a big
proponent of this versus just buying a standalone long term
care policy. Standalone long term care policies are great. The

(21:31):
problem is if you never use it and you die,
you don't get anything back. A life insurance policy is
going to pay regardless. Now you have to pay the premium,
but if you structure them correctly, sometimes you can have
these paid for them by the time you reach retirement.
So keep that in mind. How does life insurance pay out?

(21:53):
In most cases, life insurance pays out and a lump
sum paid to a beneficiary when the policy holder does.
A life insurance payout works differently if it's set up
as an installment payout option or an annuity option. Now,
some parents will do this because they're protecting the beneficiary
from the money. A lot of people don't know how

(22:15):
to manage a couple million dollars, so maybe they would
make it a payout instead of a lump sum, or
they would have it paid to a trust. Let's see,
most insurance will take two to four weeks after receiving
a death benefit claim in order to pay a death benefit.

(22:36):
A lot of some companies today can do that within
seventy two hours, depending on the company. Understand you do
need a death claim. You need a death certificate in
order to file a claim, so keep that in mind.
I will be talking about life insurance more this month.
September is Life Insurance Awareness Month, so I'll talk more

(22:59):
about this throughout the month. Don't forget. I give monthly
virtual meetings regarding Medicare for two different companies every month.
In one meeting, I will cover Medicare supplement plans with
a standalone drug plan. That meeting is sponsored by well
Mark United Healthcare as a sponsor. For the other virtual meeting,

(23:21):
I focus on Medicare Advantage plans known as Medicare Parts
C and cover the benefits of that platform. Upcoming Medicare
meetings I'm going to have September sixteenth and September eighteenth,
and in October. My dates for virtual meetings are going
to be October ninth and October fourteenth. One thing I

(23:48):
did forget to cover what happens if you're denied for
life insurance. One thing I would do if you are denied,
contact the insurance company to make sure there wasn't a
mis stake on the insurance application. If there was no mistake,
find out the reason for the denial of acceptance. Once

(24:10):
you know that, you can try working with your financial
professional that specializes in high risk applications and applicants. You
may have to go to a guaranteed UH insurable plan.
Then you're welcome to call my office at five six
three three three two two two zero zero for zoom

(24:33):
meeting codes and additional dates and times. You're also welcome
to email me at Craig at Craigshillig dot com and
that's my name, c r ai G at c r
ai G S c h I L l I G
dot com, and I'd be happy to send you the
virtual zoomlink meeting codes and or additional dates and times.

(24:58):
This is Craig Schillig is Saved Money