newjerseynewsroom.com

BY WARREN BOROSON

NEWJERSEYNEWSROOM.COM

BOROSON ON MONEY

Term or whole life insurance?

At what age should you consider buying long-term care insurance?

If you have disability coverage from your job, might you consider a supplemental policy?

What about annuities — immediate annuities, those that pay you now and for as long as you live?

For answers, I consulted Joseph Leone, who has splendid credentials. He’s a CPA. And a CFP. And a CLU (Chartered Life Underwriter).

He’s a partner in a company, The Pinnacle Benefits Group, with offices in Manasquan and Boonton, which works with small business owners, financial planners, CPAs, and lawyers to suggest which policies to purchase for themselves and their clients.

Leone points out that he’s a broker, not an agent: He can recommend the best policies out there, not just the policies of a company that employs him.

Term versus whole life?

Most good financial planners recommend term, which – unlike whole life – does not come with a savings account. It’s pure insurance.

Leone points out that term is fine – for short-term coverage, 20 or 30 years. Most people drop term insurance when they get older as the cost becomes “ridiculously expensive.”

If you want to leave something for your heirs, or to cover estate taxes, Leone says, you might consider guaranteed universal life – a less expensive alternative whole-life. Guaranteed universal life, “unlike term insurance, can cover you past age 100 and leave money for your heirs. And it’s for protection, not for savings.”

Health Insurance Issues.

Leone strongly recommends high-deductible health insurance policies for small businesses. Reason: They are required for HSAs (health savings accounts), which have important tax benefits. “Many planners and CPAs don’t recommend HSAs because they are difficult to understand, but the typical savings can be tremendous.”

Long-Term Health Care.

When should you buy it?

“As soon as you can afford it,” Leone says.

When you’re done putting your last child through college or graduate school, he suggests, take the money you’re saving and purchase a policy. Typically, at age 50 to 55.

What kind of coverage should you get? It depends on what you can afford, he says. And how much risk you’re willing to take on yourself. “Don’t try to cover everything. Don’t look at it as an all-or-nothing choice. Understand the risks and determine how much you’re willing to take.”

He recommends a “shared” policy – where both spouses pool their benefits. Such shared policies are less expensive, he points out, and they can cover a situation where one spouse lives into his or her 90s.

On Immediate Annuities.

Deferred variable annuities are expensive compared with their benefits, Leone says, and he doesn’t recommend a lot of them. However, newer designs have higher rates of return and should be considered. “Make sure you understand the costs.”

But immediate annuities are a different story. And while now may not be the best time to buy one (interest rates are low),

“These days,” he says, “some planners look at immediate annuities as part of a reasonable portfolio. The payout continues for as long as the person is alive, which provides some protection against running out of money.”

Disability Coverage

Leone points out that if you’re earnings $10,000 a month or less, a policy that provides 60% of that income, or $6,000 a month when you’re disabled, should cover most of your bills, since it is usually about what individuals take home after taxes.

But if instead of earning $120,000 a year you’re earning $180,000, a supplemental policy may be a good idea. Some group disability-insurance payments are capped at $10,000 a month, and in this case, you may need more coverage.