INSURANCE CHECKLIST FOR 2014

Insurance is purchased for many reasons. The primary one is to transfer risk. Life insurance provides a tax-free death benefit to heirs to pay off debt or replace lost income. Disability insurance is designed to replace lost income in the event of an accident or illness. Long-term care insurance helps pay for services and settings when a long-term illness occurs. If you acquired any of these products as part of your financial or retirement plan, it’s important to review the features periodically to determine if your original need for the coverage still exists and if the product is performing the way you expected it to. Following are some questions that will help you review your coverage.

Life Insurance

1. What type of life insurance do you own? Is it term or permanent (universal or whole Life) insurance?

2. What is your death benefit?

3. If you have a whole life policy, what is your cash surrender value?

4. What is your premium? How long is it guaranteed for?

5. Are your beneficiaries up to date?

6. Have you paid off the debt or fulfilled the obligations you originally purchased the coverage for? Your life circumstances may have changed and you may no longer need the coverage.

7. Would it be practical to exchange your current life policy for a life insurance policy with long-term care or chronic illness rider through a 1035 exchange as allowed through the Pension Protection Act?

8. If you have a life insurance policy with cash value, do you know that you can use some of that cash value to pay for a long-term care insurance premium tax-free?

Long-Term Care Insurance

1. Do you own a partnership or non-partnership plan? A partnership plan would provide total or partial asset protection in NYS if you exhaust your benefits and still need care. Once you exhaust your benefits, you are also able to apply for Medicaid without any look-back period for gifting.

2. If you have a non-partnership plan, is it based on a reimbursement or cash/indemnity payment model? A reimbursement plan would pay up to your daily/monthly benefit for actual expenses while a cash/indemnity plan would pay your full benefit regardless of the actual cost of care.

3. Do you have inflation protection? If so, how has your daily/monthly benefit grown?

4. Is your daily/monthly benefit keeping pace with the cost of care in your area? Do you need to supplement your benefit?

5. What are the triggers to receive benefits? Some older policies require you to be unable to perform 2 out of 5 activities of daily living as opposed to 2 out of 6 for the newer plans. Bathing was often missing as a trigger.

6. Does your home care benefit allow you to use independent caregivers or unskilled/unlicensed caregivers as opposed to only an agency?

7. Did you assign a third party to receive notification if you forget to pay your premium? Countless policies lapse because a premium has not been paid.

8. Are you aware that there is a 20% NYS tax credit on your premium if your policy is tax-qualified? Since 1997, most long-term care insurance policies are tax-qualified.

Disability Insurance

1. Do you have short-term or long-term disability?

2. Does the policy provide own occupation protection? Own occupation protection means that you have to be unable to perform the duties of your occupation as opposed to a policy that guarantees to pay benefits if you are unable to work at all.

3. What is you maximum monthly benefit?

4. Can you increase your benefit?

5. Are your benefits adjusted for inflation?

6. How long will your benefit be paid?

7. How is your disability determined?

8. How long do you have to wait to receive benefits?

9. Is the policy guaranteed renewable? Your policy will stay in force but the premiums may increase.

10. Can you receive partial benefits if you go back to work part-time?

11. What are the exclusions?

Insurance provides protection for you and your family against certain risks. However, needs and goals change and consequently so does your risk exposure. You should review your insurance policies at least every three to five years to make certain you understand your coverage and if it has retained its value. Set a goal to meet with your insurance agent in 2014.

Susan Suben, MS, CSA, is President of Long Term Care Associates, Inc. and Elder Care Planning. She can be reached at 800-422-2655 or by email at susansuben@31greenbush.com.