April 30, 2018 // The Usual Suspects: Find Out The 5 Most Expensive Insurance Mistakes: Written by Adrian George, President PlayCheques Financial Solutions
When was the last time your insurance advisor sat you down to review your insurance portfolio? Not doing so could be costing you money you could be putting towards eliminating your debt or growing your retirement nest egg.
Here are the top 5 issues we see when reviewing a new client’s existing insurance portfolio:
1) Monthly payments vs. annual. Maybe when you first started with insurance, paying a larger annual payment wasn’t in the cards and a lower monthly payment was necessary. However, as your income and savings have grown or your debts have decreased, in most cases switching to annual premiums saves you approximately 8% for exactly the same protection. That’s almost a month free every year!
2) Not matching up the amount of protection with your current needs. Got a mortgage or maybe a loan to start or buy into your business? Odds are you needed to purchase life insurance to protect those you love from the impact of a premature death. As you’ve paid your debts down or even off (congratulations!), did you review your insurance to see if you still need that much coverage? If not, reducing your coverage to match your current needs also reduces your premiums.
3) Disability elimination periods are too short. With more than one in four of today’s 20-year-olds expected to be out of work for at least a year before they reach the normal retirement age1 due to a disability, protecting their income with disability insurance is critical. But did you know having a 30-day elimination period often doubles the cost of protection compared to a 90-day elimination period? Having savings enough to fund the 2 month difference can save you thousands every year.
4) Return of premiums on disability. Speaking of disability protection, wouldn’t it be nice to get half of your premiums back if you don’t have a claim, particularly since you’re sure you won’t actually become disabled anyway? Typically, this rider increases your payments by half, which could be money better spent reducing your mortgage, car or student loans.
5) Owning life insurance personally. If you’re a business owner, owning your life insurance policy within your corporation can save you thousands in taxes every year. For example, if your life insurance needs cost $3,000 per year, your company needs to earn just over $3,400 to pay for it. If you own your life insurance personally (assuming an average personal 33% tax rate), your company needs to earn just over $4,400 per year. Would you rather save that $1,000 per year in your pockets, or the government’s?
These are just a few of the issues we regularly see. Want to see if we can find thousands of dollars every year while still providing protection for you and your family? Connect today to start the conversation.
1. Social Security Administration, Disability and Death Probability Tables for Insured Workers Born in 1997, Table A.