September 30, 2004

Who will care for your loved ones when your heart stops beating?

By Linda Jacobs
Special to the Times

Several times this month I have heard on the radio a scenario that goes something like this: You are sitting in your favorite easy chair in front of the television and your heart stops. You have died; what will happen now to your family and loved ones left behind? Who will pay the mortgage, cover the utility and telephone bills, raise the kids, complete the college funds or seed the retirement funds? What will happen to your family and loved ones if you are not there to see them through life?

Life insurance can provide those you love with an income stream to help them through some if not all of these major events in life. Once neighbors and friends have left the last casserole, the flowers have faded and the memorial service is complete, the delivery of the life insurance check will make all the difference in the world.

Planning for the unexpected and providing a solution, large or small, is what we are discussing here. Protect the future of your family and loved ones by providing life insurance.

September is life insurance awareness month. Take time this month to evaluate your current life insurance policies. First, update beneficiary information; sometimes the beneficiary on your policy may be your past fiancé or divorced spouses. Second, add to your Living Trust to insure the policy is accounted for, if appropriate for your financial plans. Third, consider purchasing if you do not already have a life insurance policy. Many of you may have life insurance policies that have not been reviewed in years. Whether initially purchased as an investment, for estate planning, or simply for replacement of income, it is important that the policies be regularly reviewed.

Many policies have not kept pace with current interest rates and mortality charges and it is not the responsibility of the insurance company to “update” or improve the contract you own.

As more seniors face uncertain retirement incomes, life insurance will be increasingly needed to provide for survivors. For example, should Social Security reduce or cut retirement benefits, you can expect even more seniors to look to this reliable source of capital. Life insurance can also be used to replace income lost at the death of a spouse who was working. Like annuities, life insurance can serve as a way to increase potential capital without paying added income taxes. Finally, the accumulated cash values in a permanent life insurance policy can be used to supplement an insured’s retirement income.

There are several tax-favored aspects of permanent life insurance.

Dividends on insurance policies are considered as returns of premiums previously paid and are not subject to income tax until they exceed the premiums paid into the policy.

The cash values available to the policy owner during life accumulate on a tax-deferred basis.

Life insurance death proceeds paid to the beneficiary are generally income tax free.

Do not assume you are uninsurable because you are a senior citizen, particularly those who are in the pre-retirement or early retirement phases of their life. Regardless of the size of the insurance policy, life insurance proceeds can help pay funeral expenses, often referred to as final expenses. Proceeds give survivors the financial resources to avoid the untimely liquidation of assets, such as the sale of a house or personal belongings, by furnishing negotiating strength to press for full fair market value and provide funds for the living.

Remember, the dollars from a life insurance policy will provide survivors with the ability to maintain their current lifestyles, fund the costs of higher education, and serve as a financial base for the pursuit of business and travel opportunities. The key is to start thinking about these costs and how to handle them while there is still time to plan effectively. Make the time this month to review your existing life insurance policies or investigate what life insurance can do for both you and your family in the future. To find out more about life insurance visit the National Association of Insurance and Financial Advisors Silicon Valley website at www.naifasiliconvalley.org for a list of licensed professionals in your area who specialize in insurance and financial planning.

The National Association of Insurance and Financial Advisors (NAIFA) is a national nonprofit organization representing the interests of more than 70,000 insurance and financial advisors nationwide, through its federation of over 900 state and local associations. Founded in 1890, NAIFA is the nation’s largest financial services membership association. Its mission is to advocate for a positive legislative and regulatory environment, enhance business and professional skills, and promote the ethical conduct of our members.

Linda M. Jacobs is a certified senior advisor. She is also a member of NAIFA Silicon Valley. Jacobs welcomes your comments and questions and can be reached at (408) 871-2000 X10 or LindaJacobs@terranceinsurance.com.