Even as you save and invest for the future, it's important to plan for the unexpected. That might mean setting up an emergency fund and drawing up an estate plan. But you will likely also want to consider purchasing a variety of insurance policies.
Worried about your financial future? Your Citi Financial Advisor can help you with the following types of insurance.
This is typically the least expensive way to purchase life-insurance coverage. Term policies often cover a fixed number of years, such as 10 or 20 years. Your annual premium will be based on factors such as your health history, age and gender. Many term policies offer level premium payments for the life of the policy.
If you die before the end of the term, your beneficiaries receive a death benefit. At the end of the term, you may have the option of renewing the policy at a higher premium, reflecting your more advanced age, or converting it to a permanent policy without evidence of insurability. What if you let the policy lapse? The coverage is overand you get nothing back.
Sometimes also known as cash-value life insurance, these policies provide permanent insurance, rather than for a fixed number of years. They can also allow you to build up cash value, which you can then use during your lifetime or bequeath to your beneficiaries. If you use the cash value during your lifetime, your death benefit will be reduced.
Cash-value policies, which involve higher premiums than term insurance, come in three varieties. Whole-life insurance has fixed premiums and the policy's cash value earns a fixed return. Meanwhile, universal-life insurance offers the flexibility to vary the amount of your annual premium. Universal-life policies also allow consumers to permanently withdraw cash from the policy without the interest expense associated with loans from a whole-life policy. Finally, with variable-life insurance, you have greater investment flexibility, including the option to invest in the stock market.
If you are still in the work force, your most valuable asset may be your human capitalyour ability to pull in a paycheck. What if an accident or illness makes working impossible? To protect yourself, you may want to purchase disability insurance. One rule of thumb suggests buying enough coverage to replace 50% to 70% of your current salary. In fact, you may have a tough time buying insurance that will pay much more than 70%. A policy's premium will be driven by how much income you're looking to protect, how long you want the benefit to last, your age, sex and occupation.
Long-term care insurance.
This is a type of health insurance that can help pay medical and other expenses if you have a chronic illness or disability.
Long-term care can be provided at home, in an assisted-living facility or in a nursing home. Long-term care premiums can seem expensive, but your Financial Advisor may be able to help you lower the cost by, say, opting for a longer "elimination period," which is the waiting period before benefits kick in. You can choose an elimination period of 30, 60 or 90 days or even longer, depending on how long you think you can afford to pay health-care costs yourself. You might also ask your advisor about other options, such as a single-premium life-insurance policy that gives you tax-free access to the policy's death benefit to pay long-term care costs.