What to do after receiving a life insurance death benefit

May 9, 2024 | Blog, guest blogger, Life Insurance |

When you are listed as a beneficiary on a life insurance policy, the policyowner likely wanted to help alleviate some of the financial worry that could come with their passing. From covering final expenses to providing money for future bills, life insurance proceeds can offer a safety net when it’s needed most. If you are a life insurance beneficiary and are wondering how to claim a death benefit, the process is usually straightforward. Here’s a closer look at how to file a life insurance claim and possible options for using those proceeds.

What is a life insurance death benefit?

The death benefit is the amount of money a beneficiary will receive from a life insurance policy following an insured’s death. When an individual purchases a life insurance policy, they choose a coverage amount, which is the amount of money the insurance company will pay their beneficiaries following their death.

Who receives life insurance proceeds?

When life insurance coverage is put in place, the insured names a beneficiary or beneficiaries who will receive the death benefit. Common beneficiaries include a spouse or partner, child, family member, or charity. A policy often asks for the insured to designate a primary and secondary beneficiary, where if the primary beneficiary passes away, the death benefit will go to the contingent beneficiary. An insured may also choose to have multiple beneficiaries, allowing a certain percentage of the death benefit to go to each person. If you are unsure if you are a beneficiary and the policyholder is no longer alive, you can contact the life insurance company directly.

Filing a life insurance death benefit claim

To receive benefits from a life insurance policy, a beneficiary will need to file a claim with the life insurance company following the death of the insured. After the insurance company’s claims department is notified, they will typically send a guide that outlines the claim process and a form to complete. Along with returning the completed form, a beneficiary will need to submit a certified death certificate. This can be obtained from a funeral director or county courthouse.

Settlement options for receiving death benefit Options can vary between life insurance companies, but beneficiaries can typically choose how they would like to receive a death benefit, including:
- Lump sum payment: Beneficiary will receive a single payment of the entire death benefit.
- Specific income payout: Life insurance death benefit is paid in installments over a chosen time period.
- Lifetime annuity: Beneficiary will receive a guaranteed payout for the rest of their life. The amount is typically determined by the age of the beneficiary.
- Interest only payout: If only a small amount of death benefit is needed, this option allows for the principal of the death benefit to be held by the insurance company and the beneficiary receives the interest earned.
- Interest accumulation: If the death benefit is not needed immediately, the money can be put into an interest-bearing account by the insurer. The account has the potential to earn interest and the value can grow over time. The beneficiary can typically make withdrawals from the account when needed. This option may not be available in all states.

When do beneficiaries pay taxes on a death benefit?

Death benefit proceeds are generally not taxable if they are received as a lump sum or in income payouts. If a beneficiary chooses a payout option where interest is earned, taxes may be owed on that interest and included in their taxable income. If an estate is named as a beneficiary, the person inheriting the estate may have to pay taxes.

Options for using a death benefit

Life insurance proceeds can be used for a variety of purposes, including funeral expenses, paying off debts, helping with day-to-to expenses, or supplementing retirement. When a beneficiary receives a death benefit, it can be helpful to meet with a financial professional to discuss possible options and how the money could fit into a financial plan. During the meeting, helpful questions to ask include:

How can the death benefit gain interest?
How is life insurance paid out to multiple beneficiaries?
How are taxes paid on death benefits?

The loss of a loved one can often be an emotional time, and making financial decisions is not always easy. Talking to a financial professional can help simplify the process and allow you to discuss any concerns, while exploring the different options available.

NORTH AMERICAN A Sammons Financial Company B3-NA-3-24

Business planning with life insurance

January 25, 2024 | Blog, Life Insurance |

Along with protecting your family’s financial future, life insurance can also be used as a tool to help ensure the continuation of a business. If a key employee were to die unexpectedly, the financial loss could potentially be devastating for the other partner(s). Life insurance can provide funds to a business owner’s spouse and heirs, protect his or her share of the business, and provide a way to attract and retain top talent that will support the continued success of the organization.

In the corporate world, life insurance is commonly used in key-person insurance, buy-sell agreements, succession planning, and executive bonuses. Here are some examples of how a business owner can use life insurance and how having coverage can help protect the financial future of a business.

Purchasing life insurance on a business partner

Life insurance can be used in business partnerships to help protect the business, the deceased partner’s family, and the surviving partner. “Purchasing a departing owners interest is a paramount problem in any business. Fortunately, strategically structured life insurance can perform a double duty,” says Andrew Rinn, Sammons Financial Group’s Life Division Associate Vice President of Advanced Sales Strategy. “It allows the remaining owners the ability to continue the business while giving the departing owner and their family the necessary cash to meet their personal needs.”

Purchasing life insurance on a business partner is frequently used to fund a buy-sell agreement, where each partner or the business buys a policy on a partner. In the incidence that one partner passes away, the death benefit proceeds can be used to buy the other person’s share of the business; helping to reduce the financial hardship that could be caused by a partner’s sudden departure. A buy-sell agreement helps establish a clear plan on how to distribute the shares of the departed and allows the family of the deceased to turn their business interest into monetary value if they so choose. The remaining partner can also keep working in the business they helped to create.

Using life insurance to fund a buy-sell agreement

Business owners can choose different types of life insurance to fund their buy-sell agreement, including term, universal life, or indexed universal life insurance (IUL). Term insurance provides temporary coverage for a specific period, while permanent insurance offers lifetime protection. Discussing your goals with a financial professional can help determine which type of life insurance may be right for your particular situation.

Including life insurance as part of a compensation package

Many businesses include life insurance as part of their employee benefits package, typically providing a death benefit equal to or double their annual salary. In addition, you can also recruit and retain talented employees by creating a compensation package that includes an executive bonus using life insurance. “This is a flexible tool to retain, reward and recruit a key employee,” adds Rinn. “Death benefit protection and tax-favored supplemental income can be the ideal strategy to keep top talent in your organization.”

For example, IUL insurance can provide a death benefit, as well as a “bonus” through the potential cash value generated during the lifetime of the policy. The employee can then use this cash value to supplement their retirement funds or for other purposes. What’s more, the bonus can be tax deductible to the company so long as it’s considered reasonable compensation. This provides a “win-win” for both employer and employee.

Life insurance as part of a business succession plan

Life insurance can play an important role in a business succession plan. If a business owner has multiple heirs where only one will continue to be involved in the business, life insurance can provide a way to offer equal inheritance to all beneficiaries. “Life insurance can be an ideal tool to bridge the gap between generations of business owners,” says Rinn. “It provides the liquidity to equalize an inheritance to family members not interested in the family business, while ensuring the company passes to those that will carry on the family legacy.” Specifically, the death benefit of the policy can be used to pay the family members for their shares in the company.

Here’s a hypothetical example to explain how it works. Imagine you have owned a wholesale business for 30 years and want to leave it to your daughter to own and run in your absence. Your sons do not wish to be involved with the business, but you’d like your children to receive equal amounts as an inheritance. Your business is your largest asset and you would hate for your daughter to have to sell the business to provide her brothers with an equal share. A potential solution could be to purchase a permanent life insurance policy on yourself, with a death benefit equal to a multiple of the company’s value, and make your sons the beneficiaries of the policy.

Upon your passing, each of your children would receive an equitable distribution of the inheritance; your sons would split the death benefit equally, and your daughter would inherit and run the company business.

You’ve worked hard to build your business and you likely want it to succeed long after you’re gone. In addition to safeguarding your family’s future, life insurance can also help protect your business and your partner and ensure a smooth transition if the unexpected happens. Additionally, by including life insurance in your competitive benefits package, you can bring in top talent who will further grow your business and invest in the success of your organization. Consider contacting a financial professional if you’re interested in learning more about life insurance and how it can fit into your personalized business strategy.

Neither North American nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.

Life insurance policies have terms under which the policy may be continued in effect or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity.

Indexed universal life insurance products are not an investment in the “market” or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

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REV 2/2023

North American A SAMMONS Financial Company

Choosing a life insurance policy at any age

November 16, 2023 | Blog, Life Insurance |

Throughout your life, your financial needs are likely to change. Because of this, your financial plan should evolve to help ensure you have what you need to meet your goals. Life insurance can be an essential addition to your overall strategy, no matter your age or stage in life. Even if you do not currently have life insurance, it can be an excellent time to consider how coverage can help protect your loved ones from the unexpected. Here’s what you may want to think about during each decade and how life insurance can help.

Types of life insurance policies

There are generally two basic types of life insurance to consider: term and permanent policies.

Term life insurance

Term life insurance is a policy that has a level premium for a set number of years (the term) and will remain active as long as the premium is paid. Once the term expires, your premiums will increase annually. To continue the coverage, you generally have the option to pay the higher premium, shop for a new policy or convert your policy into permanent life insurance. As long as your policy is active, your beneficiary will receive the death benefit as a lump sum following your death. This lump sum can be used for various needs, from burial expenses to mortgage and debt payments and general living expenses for your family. The death benefit is typically tax-free. Term life insurance generally offers you the following:

Affordable life insurance protection
A generally tax-free death benefit for your beneficiary

Permanent life insurance

Permanent life insurance is the general term for life insurance policies that do not expire. Unlike term life insurance, which provides death benefit protection for a specific period of years, permanent life insurance can last the insured’s lifetime as long as premiums are paid, subject to the terms of the policy. These policies may also offer the potential to build cash value. The cash value for permanent life insurance policies typically grows tax-deferred, which means you don’t pay taxes on any earnings as long as the policy remains active.1 Policyholders may access cash value 2 for a variety of reasons, including:

Help Supplement their retirement income, generally tax-free
Potentially reducing income taxes in retirement
Covering medical bills during an illness
Assisting with the mortgage or rent
Paying college tuition
Reducing debt like credit cards and student loans

A permanent life insurance policy typically costs more than a term life policy, but permanent life coverage offers you:

No expiration date. You can keep it as long as you pay the required premiums
Potential cash value growth

How much life insurance do I need?

The life insurance you buy generally depends on the money needed to pay off your debts, cover final expenses, and help support your dependents in your absence. Partnering with a financial professional throughout your life can help keep your financial goals on track and provide a trusted source of information and guidance. You can also seek their help in discussing your life insurance needs and what amount of coverage would be most suitable. Remember, your life insurance needs can change as you age, so regularly meeting with your financial professional can ensure your coverage amount still meets your current situation.

Life insurance in your 20s

As you enter adulthood, you are not only the youngest but typically the healthiest you’ll ever be. Since life insurance rates are commonly based on age and health, you usually can get the lowest premiums in your 20s. Life insurance can be a valuable purchase even if you’re single or do not have dependents. With the average funeral costing over $7,800, final expenses can be expensive for the people left behind. Life insurance can help ease the financial burden on your loved ones. Plus, if you choose permanent life insurance, you can access the cash value through policy loans to help with financial needs or unexpected emergencies.

Benefits of buying life insurance in your 20s:

Pays for funeral expenses
Offers lower coverage rates
Financially protects your loved ones
It helps your beneficiary pay off debt, whether a mortgage, credit card, or a student loan

Since it’s typically straightforward and affordable, term life insurance can be an excellent choice for most life insurance shoppers in their 20s, even if you’re on a budget. While you may start with a minor policy, you can revisit your coverage when your life changes, such as changing jobs, getting married, or starting a family.

Life insurance in your 30s

Stepping into the third decade of your life often brings new financial responsibilities and maybe when you have accumulated more assets. You may also have a partner or spouse, bought a house, and perhaps have children. Adding life insurance protection to your financial plan can help protect your family from financial hardship if you are no longer here to support them.

If you purchased a policy in your 20s, now may be a good time for a policy review. Figuring out how much insurance you need is generally based on your family’s financial obligations. If you have children, it’s also important to consider their future should something happen to you. As you explore your life insurance needs, consider such factors as the cost of caring for your child and the cost of living for your family after you’re gone. What are your monthly bills and fixed expenses? Did your income help with necessities like food and medical costs? Are there other quality-of-life needs?

Benefits of buying life insurance in your 30s:

Provides protection for a spouse or partner who relies on your income
Helps cover funeral expenses
Assists with childcare expenses
Helps ensure your beneficiary doesn’t take on your debt, like the mortgage, credit card debt, or a student loan

Life insurance in your 40s and 50s

Your needs generally change when you get older. For instance, you may no longer have children living with you, but they might still need your financial support. You may have accumulated more financial assets or are thinking about creating a legacy to leave to your loved ones. Life insurance coverage will generally cost more as you age, but it can still be very affordable. If you already have a policy through your work, now may be a good time to review it, make any adjustments, and consider adding additional insurance. Your workplace life insurance may not be enough to cover your family’s needs, and if you change jobs, you typically cannot take the policy with you. During these years, you may consider permanent life insurance, which offers potential cash value growth opportunities. This benefit can give you greater flexibility when saving for retirement and estate planning.

Benefits of buying life insurance in your 40s and 50s:

Offers financial support to your spouse or partner who relies on your income
It helps prevent financial hardship for beneficiaries who have to pay their debt on a mortgage, credit card, etc.
Helps cover final expenses
Offers a way to pay for estate taxes
Provides education funds for your children
Creates an inheritance for your loved ones

Life insurance in your 60s and beyond

Even if you’re approaching retirement and do not have life insurance, you may still have coverage options to help bring protection and peace of mind.

Many life insurance policies offer living benefits in addition to the death benefit coverage. Permanent life insurance can help with your retirement planning. Maybe you’re closing the gap to retirement, but your account is not quite where you want it to be. Cash value from your permanent life insurance policy can help supplement your retirement income, and you might be able to reduce the amount you withdraw from your retirement accounts. During retirement, withdrawals from your retirement accounts are generally taxable as regular income.1 Plus, taking income from both your retirement accounts and your life insurance policy could help keep you in a lower tax bracket.2

Benefits of buying life insurance in your 60s and beyond:

Pays for medical bills or other final expenses
Offers a way to pay for estate taxes
Provides money for debts or bills your loved ones must pay
Helps with retirement planning
Creates a legacy or inheritance for your beneficiaries

Talk to a financial professional

Knowing you’re financially protecting your loved ones and their quality of life can help bring you peace of mind through every stage of life. No matter your age, discussing your specific needs and financial goals with a financial professional can allow you to create a road map for the years ahead. You can also work together to determine which life insurance policy makes the most sense and the coverage amount that will provide the protection you need to help safeguard your family’s future.

NORTH AMERICAN A Sammons Financial Company

Term life insurance coverage at every stage of life

November 9, 2023 | Blog, Life Insurance |

Throughout your life, you will likely celebrate many milestones, from graduating college and starting a new job to getting married or buying your first home. Each momentous occasion can bring new financial responsibilities, but how would your family handle those obligations if you passed away unexpectedly?

To help protect your loved ones and ensure they have the financial support they need if you are no longer here, term life insurance can provide a financial safety net they can count on during a challenging time, such as a sudden death. Term life insurance provides a set amount of coverage for a certain length of time, usually 10, 15, 20, or 30 years, and can help your family pay for daily expenses, pay off debt, or build up savings for the future. Here’s how term life insurance can offer valuable protection through the different stages of your life.

Paying off student loans

Graduating college and heading into the workforce can be an exciting time. With a regular paycheck and potential employee benefits, you can take an important step toward building a strong financial future. But if you’re like many people, you may have graduated with student loans to pay off. On average, bachelor’s degree graduates leave college with around $26,190 in student loan debt.

What would happen to your remaining student loan debt if you were to pass away? Depending on the loan, it may fall back on someone to pay the remainder. This is where term life insurance can help—having a policy in place for the years you’ll be paying off loans can help protect your loved ones from shouldering additional debt. Depending on your student loan payment plan, a 10- or 15-term policy might be a good fit.

Tying the knot

If you’ve recently married, it can be a time of financial transitions, including combining accounts, creating a budget, or purchasing a house. As you discuss your finances with your partner, life insurance can be a valuable addition to the conversation. If you both purchase a term life insurance policy and list the other as the beneficiary, you can help ensure that your significant other will have some financial protection if you were to pass away. The death benefit can be used as the beneficiary wants. Some options include:

Funeral expenses
Living expenses
Debt repayment
Medical costs

Purchasing a house

It’s official, you’re a new homeowner! Purchasing a house is an exciting milestone and one worth celebrating. You may already have homeowner’s insurance to protect your new purchase, but have you considered life insurance? A term life insurance policy could be set up for the same length as your mortgage—15, 20, or 30years to help pay the outstanding balance. This way, if you were to pass away, your family would not be forced to move or sell the house during a difficult time. A life insurance policy can help your loved ones pay the mortgage and keep your house your home.

Replacing income

If your family depends on your paycheck, they could take a big hit financially if you were no longer here to support them. The death benefit from a term life insurance policy can help replace lost income if you pass away during your working years to assist with paying the bills, caring for children, and maintaining their lifestyle. The length of the life insurance policy can be determined based on the years until your children become adults and may even provide some money for their college education, alongside funeral costs. Some term life insurance policies include living benefits, which may allow you to accelerate a portion of the death benefit if you’re diagnosed with a qualifying illness.¹

Life is full of many exciting and happy milestones. By protecting your family with term life insurance, you can create a financial safety net for a time when it’s needed most. With many budget-friendly coverage options and various terms, you can find a policy that meets your needs, helps alleviate financial stress about the future, and gives you and your family the peace of mind you deserve to enjoy every moment on the road ahead.

¹Subject to eligibility requirements. Texas Residents: Receipt of acceleration-of-life-insurance benefits may affect your, your spouse’s or your family’s eligibility for public assistance programs such as medical assistance (Medicaid), Aid to Families with Dependent Children (AFDC), supplementary social security income (SSI), and drug assistance programs. You are advised to consult with a qualified tax advisor and with social service agencies concerning how receipt of such a payment will affect your, your spouse’s and your family’s eligibility for public assistance.

B2-NA-11-23

North American A SAMMONS Financial Company

Busting 5 myths about life insurance underwriting

August 17, 2023 | Blog, Life Insurance |

Once you submit a life insurance application, the insurance company will begin underwriting. To determine if you’re eligible for coverage, your risk profile, and your premium amount, underwriters will look at various factors, including age, gender, lifestyle, and health history. For example, if you’re a smoker, you may pay higher rates for coverage than if you’re a non-smoker. To help make applying for coverage smoother and less stressful, it can be helpful to understand what’s involved and the common misconceptions that surround this procedure.

Myth 1: Underwriting is a lengthy process

The underwriting process can vary depending on the insurer, death benefit applied for, and type of coverage, but on average, it can take two to four weeks. The process can be much quicker for certain types of coverage, like guaranteed issue and simplified issue life insurance. To help streamline the underwriting process, gather all your health information and list of prescriptions before you begin your application.

Myth 2: I do not need to include all information on my application

Providing accurate and complete information on your application will help speed up the application process and help you avoid any fraud issues. As you complete each application section, include as much detail as possible and be honest about your health, smoking status, and hobbies.

Myth 3: To get life insurance coverage, I will need a medical exam

For certain types of life insurance policies, bloodwork or a medical exam is not required. “The more comfortable companies can become using other sources to assess risk, the less frequently medical exams will be required,” says Sammons Financial Group Chief Underwriter Chris Regione. “That said, when a medical exams may still be needed it is critical for risk assessment.”

Myth 4: My pre-existing condition will make me ineligible for life insurance

Even if you have a medical condition, you may still be able to get approved for life insurance coverage. “Many clients with one or more pre-existing conditions could still qualify for life insurance,” states Regione. “Understanding pre-existing conditions and the severity of these is critical to underwriting . Companies take a holistic approach to risk assessment. This means they are looking for ways to offer coverage within the company’s risk appetite and tolerance.”

Your health history can affect what type of policy you are eligible for and how much premium you’ll pay each month. If you have asthma, for instance, the underwriter may review when you were diagnosed, how frequently you have symptoms, if you’ve been hospitalized, and what medications you take. If you manage your asthma effectively, you may still qualify for a standard or preferred rate. However, even if you experience asthma attacks or need medical assistance, you can still be eligible for coverage, it just may be at a higher premium.

Remember that underwriting guidelines vary among insurance companies, so working with a financial professional can help find the best policy for you.

Myth 5: Risky hobbies will prevent you from getting coverage

When applying for life insurance coverage, you will likely be asked about your lifestyle habits and hobbies, safety precautions, and how often you participate in these activities. “The key is for the company to have a nuanced understanding of a person’s lifestyle habits, hobbies and activity,” shares Regione. “For example, understanding how often they engage in risky behavior and the type of activities they engage in will provide guidance to determine the best rate class that can be provided.”

Even if you enjoy skydiving or rock climbing, it doesn’t necessarily put you out of the running for getting a policy. Since participating in high-risk jobs or hobbies can affect your life expectancy, the insurance company must consider these. Many companies will still approve you for coverage, but these factors may increase your monthly premium.

Separating fact from fiction regarding life insurance underwriting can help you become better informed about the process and what you can do to make the steps go smoothly. When you understand the timing and what to expect, you can help lower your stress about applying for coverage and help put financial protection in place today.

B1-NA-6-23

NORTH AMERICAN A Sammons Financial Company

Is life insurance available to a non-citizen?

May 11, 2023 | Blog, Life Insurance |

Life insurance can help safeguard your loved ones’ future and financially protect them from the unexpected, allowing them to cover final expenses, keep up with daily living costs, and save for the future. If you’ve recently moved to the U.S. for a permanent stay and are wondering if you’re able to purchase life insurance, there are a few things to keep in mind.

Life insurance for immigrants

Each life insurance company may have different rules around applicants who are not U.S. citizens, so it’s important to do your research. Life insurance companies may consider some of the following:

Length of residency: You may need to provide proof of U.S. residency for a certain number of years before being eligible to apply for coverage.
Country considerations: Some countries may not allow you to buy life insurance in the U.S. due to regulations.
U.S. limitations: People moving to the U.S. from certain countries may require additional underwriting.

For people who have moved to the U.S. and have obtained a green card or visa, many life insurance companies do provide coverage options. Along with the typical underwriting process, you may be required to provide some additional information when you apply.

Visa holders

If you have a visa, you have permission for residence within the U.S for a designated period of time, typically for school or work. To apply for life insurance, visa holders typically have more documentation to provide to the insurance company than a green card holder. You will often have to share, how long you have been here and whether you plan to permanently reside here in the future. You may need to provide a copy of your visa and other supporting documentation. The insurance company may also have you fill out a foreign resident questionnaire that asks you questions about your employment and travel history.

Green card holders

If you have a green card, you are considered a permanent resident and can usually apply for life insurance coverage as a U.S. citizen. There will likely be a section on the application that allows you to disclose your resident status.

Undocumented immigrants

Without proper identification and documentation, such as a green card or visa, it can be more difficult to obtain life insurance coverage. Not all carriers accept undocumented immigrants, but companies that do most likely require an Individual Taxpayer Identification Number (ITIN) and may have limitations on the death benefit amount or type of coverage that they offer.

NORTH AMERICAN A Sammons Financial Company

New job checklist: organizing your finances after a career change

April 20, 2023 | Life Insurance |

Starting on a new career path can be a thrilling and busy time full of new routines, expectations, and responsibilities. Whether you’re stepping into a different role or changing your profession completely, there are likely financial changes to be prepared for to ensure a smooth transition. With new company benefits, compensation, and insurance coverage to coordinate, here are some helpful steps to add to your career change checklist.

Sign up for company benefits

Upon starting your new job, your compensation package may include new coverage policies, flexible or health spending accounts, paid time off, bonuses and commissions, childcare, student loan repayment, and tuition reimbursement. Be sure to review your onboarding packet and keep an eye out for emails so you know which benefits require enrollment and if there are eligibility waiting periods. Certain benefits, such as company-sponsored short-term and long-term disability coverage, often require up to a year of service with the company before you are able to apply the benefit. Be aware of these waiting periods and explore supplementary coverage options to make sure your income and health are fully protected throughout your first year of employment until waiting periods are met.

Your company may also offer informational events to explore all the benefits available to you. If you have questions about any of your benefits or company perks, reach out to the hiring manager or Human Resources representative for assistance.

Review insurance coverage

When you leave an employer, benefits such as medical, dental, and vision insurance coverage will likely terminate within the 30 days following your last day of employment with your previous employer. It is important to confirm those details to ensure you do not have any gaps in coverage. If you are transitioning from a previous medical plan to your new employer’s medical plan, it is good practice to fill prescriptions or schedule your regular doctor’s appointments prior to coverage termination because it can take over a week for a new insurance company to recognize you as a member in their system. You will be offered COBRA (Consolidated Omnibus Budget Reconciliation Act)coverage to continue your previous employer’s health coverage for 18 months, this option is usually more expensive as you forfeit the company’s contribution to your monthly premiums and you begin to pay the full cost of the plan. Another important consideration is if you had group life insurance coverage, which will likely end but may have options for you to convert the coverage to an individual policy.

Eligibility for the benefit programs at your new company can start anywhere between your first day or your ninetieth day of employment. Be sure to review when coverage will go into place and check your onboarding packet for deadlines to enroll. You often have to make enrollment decisions within the first month of employment and, if this deadline is missed, the opportunity to elect coverage may be closed until the next annual open enrollment timeframe.

Coordinate your paycheck and budget

Stepping into a new career can often reveal financial opportunities, whether it’s a bigger paycheck, bonuses, retirement benefits, or other positive perks. As you begin to get into the swing of things, it can be beneficial to revisit your budget and account for the incoming changes. Is the pay period different from your previous employer’s? Do you have a little extra you can put into savings each month? If your organization is similar to most employers, you can likely count on a bi-monthly paycheck. To make sure your income can cover your expenses and also work toward achieving your short- and long-term financial goals, take a detailed look at your budget.

A common strategy is breaking down your paycheck by the 50/30/20 rule of thumb. 50% of your payment will go to essentials like your rent/mortgage, groceries, utility bills, and regular expenses. 30% of your paycheck is reserved for non-essentials, including entertainment, dining out, and travel. The remaining 20% would then be allocated to personal savings and financial goals. This could include paying down debt, building an emergency fund, and putting money toward retirement. If your paycheck frequency becomes more often and you’re getting paid every week, you may want to update your budget to spread out bill payments throughout the month, since money will be coming in more regularly.

As you build a budget around your new income, it is also good practice to review your first few paychecks to be aware of your payroll deductions. Federal and state income taxes are considered mandatory deductions and likely outside your control. Other, pre-tax deductions such as monthly benefit premiums and 401(k) retirement plan contributions are something you may want to audit. As you organize your budget, remember to use your net pay, or the amount remaining after your payroll deductions have been subtracted, to calculate how much money can be allocated to each area. Even if your new job comes with a higher paycheck, you don’t need to change your day-to-day expenses if it’s not necessary to do so. Instead, this could provide an opportunity to put more toward savings, reduce debt, or contribute more to your retirement account(s) for the future.

Keep up with your retirement savings

Oftentimes moving in a new career direction provides fresh opportunities to save for the future and create a more financially secure retirement. Take a proactive approach to familiarize yourself with your new benefit offerings to maximize your savings opportunities. Your compensation package may contain a higher employer match on your 401(k) but you need to ensure your own contribution is sufficient to be eligible for the full employer portion. Or your new company may offer stock ownership opportunities, but it requires active enrollment into their stock program. Since you’ve worked hard to begin building for the future, it’s important to keep that retirement savings momentum with a simple review of your existing retirement accounts to determine how best to move forward with the new options available to you.

If you have a 401(k) with your previous employer, you have a few options depending on your personal goals. You can leave the account where it is and no longer contribute to it; roll it over to your new employer’s 401(k); take a lump sum distribution, known as cashing it out; or roll it into a traditional or Roth IRA outside of your new employer’s plan. You may want to talk to your financial professional about what may be your best move based on your current account balance, tax implications, withdrawal fees, and savings options outside your previous and current employer.

What happens to your retirement account when you change jobs?

If you decide to leave your 401(k) with a previous employer, your funds will continue to be managed and your money will grow based on the investment option selected, but you will no longer be able to make contributions to that account. You may be able to organize a direct 401(k) rollover, which will transfer funds from your previous employer’s 401(k) to your new plan without incurring taxes or penalties. If you go this route and keep your account with your former employer, be sure to keep that account on your radar and keep your contact information with the plan sponsor current.

Do you have to roll over a 401(k) when you change jobs?

If you prefer to keep your assets all in one place, you likely have the option to roll over your 401(k) to your new employer, but it is not required. However, accounts held with your previous employer may now incur monthly processing fees that you have to pay as you are no longer part of their group plan. Verifying the cost of maintaining your previous accounts could influence whether or not you decide to consolidate your 401(k) savings. You may be able to organize a direct 401(k) rollover which will transfer funds from your previous employer’s 401(k) to your new plan without incurring taxes or penalties. It’s important to check with your new company’s plan administrator to see if rollovers are permitted and what steps are required.

A new job can reveal many untapped opportunities, from expanding your network and skill set to boosting financial and professional wellness. Taking a new career direction is often a good time to connect with your financial professional to make any updates to your financial plan, revise your budget, and decide if you can add or delete any goals to better align with your current situation. Even though a career change can be a hectic time, taking a minute to make a financial plan for the transition can help you be better prepared for the updates that lie ahead and allow you to make the most of this exciting time in your life.

B3-NA-2-23

REV 2/2023

NORTH AMERICAN

A Sammons Financial Company

So What Happens to Your Life Insurance After You Die?

March 30, 2023 | Blog, Life Insurance |

Getting life insurance is a no-brainer, as it can provide your family and loved ones with crucial financial protection if you pass away. But how exactly does it work? And by that, we mean how does it “kick in” and provide the benefits once you die? Let’s explore this question and more.

First steps

First, it’s worth mentioning that it is the responsibility of the policy beneficiary, or beneficiaries, to file a claim. In other words, they must contact the insurance company and inform them of the policyholder’s death, typically by sending a death certificate and filling out a claim form to ask the insurer for the money. Contrary to what some may believe, there is no “death list” that goes around to perform this task automatically, so know that it’s not the life insurance company’s responsibility to realize that you have passed away or chase down your beneficiaries.

Because you will likely want to know who gets your money after you die, be sure to create a will that clearly states who will receive your money and informs them that you purchased a life insurance policy. In your will, it’s very helpful to include detailed information, such as your policy number and accurate contact details for your insurer. Without this information, it may take some additional time to verify your claim before the payout is received.

With all information in order, the beneficiary can proceed with contacting the insurer, sending the death certificate, filling out the claim forms and receiving the processed benefit amount when it’s paid out.

More detailed information on the entire claims process can be found here.

Who gets your life insurance payout when you die?

Life insurance claims can be paid out in several ways. Here are some of them.

To an estate

If your beneficiaries are not specified as part of your life insurance policy, the proceeds will likely, by default, be treated as part of your estate. If a will was enacted, then your beneficiary wishes will be followed as closely as possible.

This is another good example of why the creation of a will is very important to ensure there is no ambiguity over your estate and your life insurance proceeds.

To a beneficiary

If you include accurate, up-to-date beneficiary information on your life insurance policy, the money can only be claimed by the beneficiary or beneficiaries. However, there are sometimes mitigating circumstances to consider, such as an untimely death of a beneficiary. In most cases, if the listed beneficiary dies before the policyholder, the beneficiary’s heirs are entitled to the proceeds.

Into a trust

If you set up your life insurance proceeds to be paid into a trust when you pass away, that money will be held in the trust appropriately and distributed as a claim per the instructions outlined in that trust.

Naming and paying out to a trust can be an excellent way to help mitigate inheritance taxes and may also be used to satisfy an inheritance tax bill (typically on a larger-sized estate) without needing to liquidate assets.

Will my beneficiaries have to pay taxes on the proceeds of my life insurance policy?

Good news! When considering the death benefits of a life insurance policy, the payout is generally free from any income tax to your selected beneficiary or beneficiaries.

However, you may choose to have the insurance company keep these proceeds for a while after your death so they can be distributed to your beneficiary in a series of installments or at a later date. This way, the funds may continue to earn interest. When a payment is made to your selected beneficiary later on, it may be a larger amount because of the interest earned. Note that while the principal portion of the payment is typically free of taxes, the interest portion would be taxable to the beneficiary as ordinary income, so they would be on the hook for at least some taxes in this scenario.

Finally, in some cases, if the ownership of your life insurance policy is transferred to another party for monetary value before you die, the proceeds your beneficiary receives at your death could also be considered taxable income.

We hope this information is helpful to you. As with any complicated financial matter, it’s always best to seek the assistance of a professional who can walk you through your questions and particular situation.

Life Happens, by Kirk Cremer | March 8, 2023

Why buy life insurance in your 40’s

January 12, 2023 | Blog, Life Insurance |

There was a time, perhaps a generation or two ago, when turning 40 meant you were “no longer a spring chicken,” or “over-the-hill.” In other words, 40 was old.

But in the last 30 years or so, a dramatic change has taken place. With all we’ve learned about the benefits of proper diet and exercise, it’s no surprise that people are taking better care of themselves. The amount of adults who smoke has declined from 21% to just 15% and that number is still dropping. Millions have instead taken up running, biking, meditating, and other healthy activities. As a result, people are living longer and looking far younger than their birthday might indicate. And 40? It’s taken on a whole new meaning.

Why do I need life insurance?

People are taking better care of themselves and thus living longer, but there are reasons for getting life insurance beyond living a longer life. Many people are also postponing marriage, children and home buying well into their 30s and beyond. So rather than the usual financial obligations ending for most by their mid-50s as they once did, today their obligations can stretch well into their 60s.

That means many 40-somethings are in the peak years of their heaviest financial obligations – paying the mortgage while saving for college and retirement. Life insurance over the age of 40 for most people isn’t just a consideration, it’s a necessity. In fact, it may be exactly the right time to increase your existing coverage, or to get coverage for the first time.

And while life insurance might have been less expensive to buy in your 20s, the longer you wait to protect your family, the more expensive that coverage will continue to become.

Financial needs are easier to assess in your 40s

Yes, life insurance does cost more the older you get, but here’s some good news. By the time you reach your 40s, it’s far easier to precisely determine your financial needs. When you were in your 30s, and especially your 20s, $200,000 probably sounded like a fortune. It was easy to imagine living on that money for the rest of your life. But as the years have passed, your salary has increased along with the costs of maintaining your home, car, a 529 plan, and the day-to-day expenses of life.

Buying life insurance when you were younger meant guessing where you’d be in your life. It would have been easy to buy too little or maybe even too much coverage. So if you did purchase life insurance at a younger age, it’s a good idea to review your coverage annually, in case your needs have increased.

Think about what you need to protect now

Whether you’re getting life insurance for the first time, or increasing existing coverage to protect your expanding assets, the first step is to assess your financial needs and obligations. Has your salary increased over the years? Is it likely to continue increasing? Do you have children? Are you paying for college? Or contributing to a 529 plan? Are you and your partner prepared for retirement? How much is left on your mortgage? These are all enormous expenses that your partner will have to take on alone should the unthinkable happen to you.

Then again, you may be farther along in your financial obligations. Your mortgage may be paid off, and your children may have already finished college. If so, good for you! In that case, your life insurance needs won’t be as critical but you might want to consider term life insurance for estate planning. Naming your partner as beneficiary would provide for a more comfortable retirement, free of the tax implications that may come with inheriting retirement accounts like an IRA or 401(k). Of course, you could also name your children as beneficiaries, and help to transfer some of your assets to the next generation without worrying about taxes.

Getting the details right

While term life insurance is one of the most affordable types of coverage available, getting the details right can help make sure you get the right coverage at the right price. These details include:

Coverage amount. As we’ve shown, your finances will determine how much coverage you need. Experts recommend six to eight times your annual salary, but that’s just a start. To get a more accurate number, take a good look at where that money may need to go:

Living expenses, including rent or mortgage
Household debt
Childcare expenses
Estate and other taxes
College tuition
Medical bills
Funeral costs

The term. If you’re buying life insurance in your 40s, you might think a shorter duration would be a good way to save money. But think about a 10-year term. That only takes you into your 50s. You’re still young and may have some significant financial obligations still to come. Be sure to consider everything, and plan for it.

Beneficiaries. People usually choose their partner as sole beneficiary. But, if you have dependents, you may need to think about naming what’s known as a contingent beneficiary. This is often a family member who would care for your children if both you and your partner were to die.

Stay-at-home parents. Do stay-at-home parents need life insurance? It’s impossible to overstate how much a stay-at-home parent contributes to the family finances. While he or she may not earn a salary, they provide non-stop benefits that would have to be paid for if they were no longer there – daycare, at-home education, carpools, preparing meals…you get the idea.

The best age to get life insurance? Right now.

We all know what life insurance is designed to do. And many of us wait years, or decades to start a family, or buy a home. So, we never even asked ourselves, “When should I get life insurance?” because we never thought we needed it. But for those of us who woke up one day with house and car payments or little ones filling the house with love and laughter, there’s no going back. Now is the time to think about how much they mean to you, and how much you mean to them.

By purchasing term life insurance now, in your 40s, you can help protect all the joyful days the kids have ahead, or your partner’s ability to pay the bills and let them stay in the home they know and love. Because what we do now matters in the years ahead of us, not the years behind us.

Banner Life/Legal & General

Why you need to consider term life insurance in your 20s and 30s

December 15, 2022 | Blog, Life Insurance |

Life insurance? Under 30? You might be asking yourself why anyone who’s young and healthy would even need to think about life insurance. Well, as it turns out there are a lot of good reasons for people to consider getting term life insurance as early as possible.

Protect your family. Now.

Many people often ask themselves what’s the best age to buy life insurance? When you’re young and single, and no one financially depends on you, you probably think you don’t need it. But family obligations come in many forms, and life can change on a dime. Being prepared for the unexpected is far better than scrambling to figure things out once it’s too late. We all have people we care about–people who we want to protect even if we’re no longer around.

Family members. Even if you’re single, there may still be someone who depends on you. Perhaps a parent, or a sibling. But what if you (and your income) were suddenly gone? What would your loved ones do? Having a life insurance plan in place when you’re starting out gives you peace of mind, knowing the people you care about will be taken care of should something happen to you.

Your partner or spouse. Marriage, of course, means financial interdependence. But the same is often true of people who are not yet married. Could one of you afford to stay in your home on one income? Whether you’re married or permanently partnered, life insurance may be one of the most important decisions you can make to protect one another from the unexpected. It means giving your partner the financial resources to pay the rent or mortgage, cover the bills, while grieving and figuring out what comes next.

Children. In 2016, millennial moms accounted for 82% of births in the US even though the general trend these days is to wait to have children later in life. So, whether you’re 25, 35, or 45, having children means needing life insurance so their lives are not permanently interrupted should the unthinkable happen to you or your spouse.

Your coverage will never cost less.

While life insurance may be the last thing on your mind in your 20s and 30s, the fact is you’re passing up a once-in-a-lifetime opportunity by waiting until you’re older. Life insurance premiums are calculated based on your age and health when you initially buy the policy. Being young and healthy means your premiums will be lower than at any other time in your life. And with every year that you wait, the premiums will typically increase. And, rather than saving money by skipping life insurance for all those years, you’ve actually cost yourself a great deal more in higher premiums later on.

Easy to qualify.

Remember when we said being young and healthy meant low premiums? Well, being in tip-top health is also an advantage. In fact, you may be able to get the life insurance coverage you need right away – without the inconvenience of a medical exam. That saves time and money. And think of the alternative. You wait 25 years or so. You may still be in great shape. You exercise. Eat well. But your blood pressure is just a little high. Or you may have a few extra pounds you can’t get rid of. And suddenly you find that getting the coverage you need has become not only more expensive, but more difficult as well.

There’s a lot more to come. And a lot more to protect.

When you get life insurance you have to remember you’re not just protecting what you have now, but everything you and your family could have in the future. That’s why for many people term life is the best type of life insurance for a 30-year old because it offers the best of both – affordable coverage and the protection you need during the years you need it. And term life is flexible. It’s available in policies that cover you for 10, 15, 20, 25, or 30 years.

In order to figure out how long you’ll need coverage, think about where you are in your life right now. Have you just started a family? Then you might consider a policy that protects your family until your youngest graduates college. Are you in your 30s, and just bought a house? Maybe you want to get a longer term to make sure the mortgage is paid so your spouse doesn’t have to raid your retirement savings to get by.

Your debts and final expenses are covered.

Many people don’t realize that when they die their financial obligations live on. And some of us can have quite a bit more debt than we realize, from credit cards and car loans to student loans and mortgages. In fact, the average 35-year old has $133,100 in debt on average. And like we said, it doesn’t just go away once you die.

Let’s look at the type of debt you may have. If your parents co-signed a car loan or a credit card, they’d be responsible for paying that off after your death. Depending on what state you live in, your spouse may also be financially obligated to pay off all your debts even if he/she wasn’t a co-signor. And while government student loans are forgiven, private student loans are not. Anyone who co-signed for your student loans are on the hook for those too.

We know no one wants to think about it, but on top of everything else, your loved ones will have to pay for your funeral. And that could really hurt. Because the average funeral now costs about $8,755, according to the National Funeral Directors Association. And then there’s the rent, car payment, bills, and all the usual day-to-day expenses that are a part of life.

Your life has only just started. Protect it.

While it may seem like you don’t need life insurance because you don’t have anything to protect, chances are you probably have a lot more that needs protecting than you realize. Plus, it’s always smart to plan for the future. Are you planning on buying a house one day? Settling down and getting married? Maybe even having a few kids? If the answer is yes to any of those questions, then you should consider getting life insurance while you’re young and healthy.

So, if you’re still asking yourself what’s the best age to buy life insurance? The answer is now. We are here to answer your questions – 817.545.3900.

information provided by Banner, Legal and General