Keller Free Financial Workshop
October 16, 2010 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
How much insurance do you really need?
It can often seem challenging to get an objective answer to this question.
On Tuesday, October 19, at 6:30 pm, I will be presenting a free personal finance workshop at the Keller Public Library on life insurance, disability insurance, and long-term care insurance. We will cover the basics of each type of coverage: what it is, who should consider having it, different kinds, and criteria to determine how much (if any) to purchase. You will receive objective facts on these important insurance coverages to support your decisions on managing financial risks for yourself and your family. I’m a fee only financial planner which means I provide financial advice and planning, but I don’t sell financial or insurance products or receive any compensation from your purchases.
The Keller Public Library is at 640 Johnson Drive. RSVPs are encouraged to ensure adequate seating to library@cityofkeller.com.
When an Insurance Company Fails
May 10, 2010 by Jean Keener, CFP, CRPC, CFDS · 1 Comment
Last week I attended the Financial Planning Association annual symposium in Dallas, and one of the speakers was Bart Boles, executive director for Texas’ insurance guaranty association. He shared the association’s processes when an insurance company fails, and how we as the consumer would likely be affected. Some of the exclusions and limits are important information to consider in your individual planning process. With this information, you can make smart insurance purchase decisions and avoid any surprises if the worst happens.
If your insurance company fails, here are the limits to what the association would cover.
Funds required for this coverage don’t come from tax payer dollars. They come from assessments of other insurance companies.
Health Insurance (all per individual per insolvent company)
- $500,000 for hospital, medical & surgical and major medical
- $300,000 disability and LTC insurance
- $200,000 all other health insurance
Life Insurance (all per insured life per insolvent company)
- $100,000 of cash surrender value
- $300,000 of death benefits
- $5 million per owner of multiple non-group policies
Annuities (all per insolvent company)
- $100,000 of the present value of annuity benefits per insured life (individual and allocated group annuities)
- $100,000 per payee for structured settlement immediate annuities
- $5 million per owner of unallocated group annuity
Aggregate Limit
- $300,000 of aggregate benefits for an individual per insolvent company (with the exception of the individual limits listed above exceeding this amount)
Exclusions
Some of the exclusions include:
- Insurance policies with insurance companies not licensed to do business in Texas
- Benefits of an insurance policy that are not guaranteed by the insurance company (such as the non-guaranteed portion of a variable life insurance or annuity contract)
- Benefits for which the policyholder bears the risk (such as certain variable or indexed annuities). Specifically, equity-indexed annuities are not covered.
- Interest rate yields that exceed an average rate set by the terms of the Texas Guaranty Association law. This can come into play with some annuities offering high guaranteed rates.
- Items not part of the specific written terms of the policy, such as claims based on marketing materials, side letters, riders not part of the approved policy form, misrepresentation, etc. For example, if the agent wrote a note on your application guaranteeing a benefit that’s not expressly in the contract, that’s not covered.
- PBGC protected annuities
- Property and casualty insurance policies (such as auto, homeowner’s, workers compensation, etc.). This is covered by a separate guaranty organization. Their website is: http://www.tpciga.org/
There are other exclusions as well. For more information on this, visit the FAQ section of the Texas Guaranty Assocation’s website.
In addition to the limits, being aware of the exclusions is also an important part of the insurance purchase process. If your policy is fully excluded, an extreme amount of due diligence needs to be done on the company prior to purchase. If a particular guarantee is a critical part of your purchase decision, you need to read the actual contract and make sure it’s clearly communicated in the contract and not just in the marketing materials. You should also verify that the guarantee falls within the limits of what’s covered. If it’s above the limits, consider the worst-case scenario and ask yourself if you could live with that outcome and if your purchase decision still makes sense given that possibility.
Do you need disability insurance?
July 15, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Lack of long-term disability insurance is one of the most common issues I see in my practice.
First, please note that I don’t sell disability insurance. I’m a fee only financial planner, so I don’t receive any commissions on insurance or other products I recommend. My interest is in helping my clients make the best financial decisions for their lives.
Second, I’m licensed to provide insurance advice and help people figure out what kind of policy they need in the state of Texas. So if you don’t live in Texas, this isn’t directed at you.
Why is disability insurance important?
For most of us our ability to earn an income is our single biggest asset. This remains true until late in our careers. But most of us are far more likely to have life insurance than adequate disability insurance — and the odds of needing disability insurance are far greater:
So, how do you know if you need disability insurance?
There are two kinds of disability insurance — short term and long term.
You need short-term disability if you don’t have an adequate emergency fund that would cover your expenses until long-term disability started paying. If you determine you need short-term disability, first look at your employer benefits. Your company may be providing it to you already, or you may have enough built-up vacation time that you don’t need any additional income during the first 3 to 6 months of a disability. If none of these are true, then you either need to build an emergency fund or get short-term disability. Check with your employer to see if it’s available through them before you look to purchase it privately because group policies are usually less expensive.
Once you’ve got the short-term question answered, then you need to look at long-term disability. This 
is the area I see most people lacking in. Long-term disability starts after a waiting period of usually 3 to 6 months and policies can provide benefits for as little as 2 years to as much as age 67.
To determine how much long-term disability coverage you need, you need to figure out how much of your income you or your family would still need in the event of your disability. If you have two earners in the household but only need one income for your ongoing expenses, you might decide to forego the expense of disability insurance. However, most people would need at least part of their income replaced to continue paying their bills.
After you’ve determined whether you need long-term disability, look at your options. Do you already have it through your employer? As with short-term, getting long-term disability through your employer will usually be less costly than purchasing it through a private insurer. And sometimes employers even provide it as a benefit at no cost to the employee.
If you already have it or have access to it, then assess whether it’s adequate for your needs. Insurance policies vary dramatically in terms of how they define disability, elmination periods, benefit periods, whether you can go back to work part-time and still receive partial benefits, and more. The benefits can also be taxable or tax-free depending on how the premiums were paid. So it’s important to look closely at what you have and really understand the level of coverage in relationship to your individual needs.
You should also be aware of some other benefits you may already have:
Social Security: Although you shouldn’t overlook the disability benefits you may be eligible to receive from Social Security, you shouldn’t rely on them exclusively, either. Social Security denies many claims, in part due to its strict definition of disability. Even if you are deemed eligible for benefits, you still won’t begin receiving them until at least six months after you become disabled because Social Security imposes a waiting period. In addition, your benefit may replace only a fraction of your predisability income.
Workers’ compensation: If you’re injured at work or get sick from job-related causes, you may receive some disability benefits from workers’ compensation insurance. When you review your disability income insurance needs, remember that workers’ compensation pays benefits only if your disability is work related, so it offers only limited disability protection. Also note: employers in Texas are not required to provide workers compensation insurance. For more information on Texas-specific workers compensation laws, visit the Texas Department of Insurance website.
Pension plans: Some government and private pension plans pay disability benefits. Often, these plans pay benefits based on total, permanent disability, or reduce your retirement benefit in proportion to what you have already received for a disability. In addition, remember that these benefits are usually integrated with Social Security or workers’ compensation, so your benefit may be less than you expect if you also receive disability income from these government sources.