Certain concerns are expressed repeatedly. Let's shed some light on those common questions...
Mark Woodward has talked with thousands of individuals over the three decades he has been in the insurance industry. On a daily basis, Mark is asked to answer certain common questions again and again. Here are the short answers to some of the most frequently asked questions Mark has encountered. Please contact the Woodward Insurance Group if you would like to learn more about any of them.
How much life insurance should I own?
Determining the amount of life insurance to own is as simple as listing those items that you want paid for if you die. A mortgage, burial costs, college funds, charitable giving's, inheritances etc. Secondly, you must determine what income your family needs on a monthly basis. If your family needs $10,000 per month to live on after the before mentioned items are paid for then you simply divide $120,000 by a rate of return that can be earned on a lump sum of money. If I want my family to invest conservatively with this money and an after tax return of 3% is my number then you divide $120,000 by 3% which equals $4 million dollars. Is it unreasonable to assume that your future earning potential is $4 million dollars if you earn $200,000 per year? You are providing the future income to your family today that you are unable to earn due to your death.
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I am self-insured so I don't need long term care insurance, right?
It costs approximately $150/day in current dollars for long term care needs in Pennsylvania. This number rises to $300-$400 per day if you want a private room in a round-the-clock facility. This is $126,000 per year at $350/day and over half a million dollars in just 4 years.
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I don't need disability insurance - it's too expensive and I'll work if I get hurt or sick.
Your most important asset is your ability to earn income. You may live in a $500,000 home and think that this is your most valuable asset but if you are 40 years old with an income of $200,000 then your future income potential if you retire at age 65 is $200,000 X 25 years or $5 million dollars. This assumes you never get a raise at work. If you had a money machine in your home closet that produced $16,000/month would you insure it from breaking down? 1 out of every 3 people is disabled for at least 90 days during their work lifetime.
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I don't need long term care insurance. (Remember - you don't buy LTCI for yourself - you buy it for your loved ones!)
Does your son. daughter, son-in-law or daughter-in-law want to be your primary care giver? Wouldn't you rather have a skilled caregiver helping you on a daily basis so that you aren't disrupting the lives of your loved ones? Do you want to live with your children if you need care or would you rather be living on your own where there is 24 hour skilled care?
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I have heard that permanent insurance is not the best investment - is that true?
Some permanent policies offer less than attractive rates of return over time but others are quite competitive. An Indexed Universal Life plan can return 5-7% after tax returns over the life of the product with no risk of losing one's principal.
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Is it true that annuities are expensive?
Some annuities have heavy expenses and fees but many offer safety of principal regardless of market changes and have no fees. These annuities are also backed by the financial strength of the insurance carrier that sells them. Some annuities can have what is called income riders that allow for a guaranteed flow of income while in retirement.
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When should I buy Long Term Care Insurance?
Most LTCI is sold to people in their 50's and early 60's. It can become cost prohibitive once the insured reaches th late 60's and 70's.
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Which is the better type of life insurance - permanent insurance such as whole life/universal life or term life insurance?
This depends upon your situation. You should first determine the amount of life insurance that you need to properly cover your family's needs should you die prematurely. Only then do you concentrate on the type of insurance to buy. Term insurance is ideal for short periods of time and is not ideal for a long term need. Universal Life/Whole Life is a better product for those who want to hold onto some insurance forever.
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