Life Insurance

March 4, 2015
Man and his child, Life Insurance Policy Changes Wharton Insurance

Does Your Life Insurance Policy Really Cover What You Think It Does?

Many years ago you did good thing by purchasing life insurance to protect your family and your assets. However, do you know if the coverage and value of that policy are still valid today? Changes in your life over 40, 20 or even 10 years can greatly affect your insurance policies. Did you know that the typical person purchases life insurance seven times in their lifetime? These reevaluations allow your policies to reflect changes in life style, marital status, cost of living, projected income, etc. If you have outdated insurance policies, the goals you had in mind when you originally bought them may not come to fruition. Potential Life Changes that Can Affect Your Insurance Policies: Address Changes – Although it may seem simple to update your address, you might be surprised by the large number of “return to senders” there are in the insurance world. When insurance issuers do not have a current address, updates are not sent, making it even easier for policy owners to forget they have the policy. After some time, these lost policies are sent to the state unclaimed property division, rather than paying out to the beneficiaries. Also, we find that once a policyholder moves out of state, the policies tend to go unclaimed. Beneficiary Changes – When life insurance was purchased long ago, the owners can forget whom they designated to receive the benefits of their policy. Perhaps a primary or contingent beneficiary has died, or there has been a divorce. Updating your policy ensures your original intentions are carried out. Ownership updates – In some cases, the policy owner is not the insured. This situation is common in such cases as 1) an ex-spouse may hold ownership of a life insurance policy on his/her ex-spouse, or 2) a business owned policy where legal contracts are being enforced and the standing given to certain individuals in the original policy is no longer valid. It is important to review ownership of your policies to help keep surprises at a minimum when it comes time to submit a claim. Amount of coverage – We see many cases where people purchased policies 30+ years ago based on their life circumstances at that time. Costs go up over time. These outdated policy owners now find themselves underinsured, where the payout of the original policy no longer covers the costs they were intended for, like funeral expenses. We recently had a client face this issue: Our client’s mom and dad bought a policy in 1949 for $1000 to cover their funeral and final expenses. Unfortunately her dad’s end-of life care left our client paying $3,700 per month out-of-pocket. Now that he has passed, she will need to come up with the funeral expenses as well, of which that $1,000 will be a drop in the bucket. Because her parents were underinsured, she must now to go into debt to honor her father’s memory. Reevaluating your insurance coverage from time to time as life evolves can help you leave […]
January 28, 2015
life insurance

How to Ensure Your Beneficiaries Receive the Benefits of Your Life Insurance Policies

There is one thing in life you can count on – unexpected things happen. When they do, our lives and the lives of our loved ones can get hectic. Fortunately, you have taken the step to protect your family by investing in life insurance. However, how do you know that your policy will work as expected? Does anyone but you know about your insurance policies? It is important to organize your policies for your family. We have run into many cases where people have innocently ignored their insurance policies, not making their executor aware of them or losing paperwork. When no one knows of the opportunity to make a claim, it is not processed, and beneficiaries do not receive their benefits. Why pay for protection that will end up going to waste? A recent experience of one of our clients provides a clear case for why organization is necessary. Our client’s health has been in decline over the past few years due to MS. His daughter has been trying to organize and understand the benefits of a Life Insurance policy that he purchased over 40 years ago while finishing his residency in medical school, but has been running into a lot of complexities because the policy has been ignored. While working through this issue, she found the “Policyholder Service Checklist” we had sent her father about his life insurance policy. If she had not found our notice, she would have had no idea that he had a policy in effect and potentially would not have filed a claim when the time came. Fortunately, she reached out to us and we are helping her sort through all of the policies her father put in place to help her. If her father had organized his policies and we had been given her contact information in the first place, there would have been little chance that his polices would have become so hard to locate and understand. Adding a secondary contact person to your accounts will help ensure the goals of your insurance vehicles are achieved. We recommend that you contact your servicing provider on your life insurance policies, and provide them with the contact information for your designated secondary contact person. Creating a relationship with your provider will allow them to help when the ultimate need of the policy arises – such as paying for a nursing home or processing a death benefit claim. At WIFSInc we routinely work with designated power of attorneys, lawyers and family members to ensure our clients’ wishes are fulfilled. For more information on setting up a secondary contact person for your life insurance policies,  please send us an email at info@wifsinc.com or give us a call at 317.663.4138.
December 10, 2014
life insurance for businesses

What Happens to Your Business if Something Happens to You?

You are the leader of your organization, the one who sets the direction and ensures that everyone stays on course. Even if you have created a talented team for support, your organization still needs a captain at the helm. So what happens if you are no longer able to lead? For the health of the business you have worked so hard to build, you need a plan in place. Life insurance is commonly included in business succession plans as a tool to perpetuate the business, guide ownership changes, and/or protect lender interests. Each area has its own set of considerations, outlined below: Perpetuate the Business: In the case of the untimely death of an organizational leader, life insurance can help fund a plan to keep the business running and therefore, maintain its value. While it is not possible to insure receivables, organizations can insure the ability to bring someone in to support its operations. Businesses buy Key Man life insurance policies to cover the costs of attracting or retaining key individuals to fill leadership roles, and to keep them in place for a period of time. The policies are paid for and owned by the business, which is also the beneficiary. The death benefits of these policies tend to be set at 2-3 times the expected initial costs to help ensure funding lasts through the transition period. Additionally, these funds can be used to retain valued employees who could become a competitive threat if they left the organization. Direct the Transfer of Ownership: In some cases, when a key person in a business passes away, his or her share of the organization is transferred to their surviving spouse. This situation can get tricky for other partners, as the spouse may not know much about the organization, or may be mostly concerned about income. A life insurance policy owned and paid for by the company can be used to redeem a spouse’s shares in the business. The spouse receives the value of the shares and the company retains 100% ownership. The company leadership is then in complete control of the succession plan, allowing them to reinvest the capital into the organization. Policies set for businesses comprised of many partners can get quite complicated, as they are trying to protect multiple interests. Guarantee a Bank Loan: To borrow money from a bank to buy or start a business, or to fund a capital expenditure, an individual or organization may be required to carry life insurance to guarantee the loan would be repaid in the case of a death. Underlying all of these situations is the question of how best to insure the value of a person or business. Obviously in the case of the bank loan, the policy is based on the loan balance. However in terms of the Key Man and Transfer of Ownership policies, the methodology becomes more complex. CPAs tend to work out the valuation on which the policy is based along with negotiations between affected parties. The WIFS […]
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