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A new trend in insurance protects your finances throughout old age. It’s called longevity insurance, and financial experts suggest that everyone make it part of their retirement plans.

WHY YOU NEED IT

When planning for retirement, a top priority is to guarantee sufficient income for a comfortable and safe lifestyle. With the chaotic state of the nation and its economy today, you can’t really be sure about the more conventional measures for protecting your retirement.

Social security money is running out and is under constant threat from both parties in government. Your investments are relying on the most volatile market since the collapse that caused the great depression, which will only get more volatile as economic problems worsen globally. Pentions? Good luck. If you manage to secure a pention, you probably still won’t be able to trust that it will be there with the threats of cuts and constant attacks by management.

Compounding all of this is rising life expectancy. The baby boom generation is going to far outlive their parents, and the children of baby boomers will outlive even them. You might need to be planning well into your nineties, and if you were born in the late 70s or throughout the 80s, there’s a decent chance you could live past 110 years old.

The point is, retirement is becoming a significant portion of a person’s life. It’s essential that you plan for it financially.

WHAT LONGEVITY INSURANCE DOES FOR YOU

Longevity insurance is a specific type of annuity designed to provide for a person’s retirement years. It will provide you with a healthy amount of monthly income during old age. It is designed to stand in for a pention or simply add to one.

The income from longevity insurance is fixed, meaning you will always get the exact same amount. It is not dependent on investment performance or tied to the market.
Payments start at a specific age and continue as long as you live.

COSTS AND RISKS

The way you get longevity insurance is by paying one lump sum, usually well before retirement. For example, if you paid a sum of $80-thousand to the insurer when you were 60 years old, you would get the agreed-upon amount, say $50-thousand annually broken into 12 monthly payments, starting at 75 or 80 or even 85 years old.

The thing is, no matter when or what you pay or at what age you decide to retire, if you die before payments are set to begin, no money is paid out. That’s right, you lived without that $80-thousand and got no return. There are no beneficiaries or loved ones who get the money – just the insurance company.

There is also a chance that the company insuring you could go under before you retire. If that happens, you will probably lose everything. That’s why it’s important to check the companies with A.M. Best, Moody’s, Standard and Poor’s, and Finch before signing anything. (more…)

We need to go back to basics to understand what the decision really means on the deductible. The idea of insurance is very simple. If you don’t have a policy, you carry all the cost of loss. That means, if anything goes wrong, you pay out of your own pocket. Think of this as self-insurance. But, if you belong to a group that shares the cost of loss, this can save you money. Let’s say you insure your vehicle along with several thousand other people. Not everyone will have an accident so, when it comes to dividing up the cost of replacement or repair among all the members of the group, you all pay less than if you were uninsured and had an accident. Everyone pays a little, but the unlucky ones claim back a lot. This is a great system. For those of you who like politics, it’s a perfect example of socialism in action. It redistributes money collected by the group to those who need it most.

For those of a libertarian persuasion, belonging to a communist conspiracy like this is outrageous. But then consider the reality. In all but three states, it’s mandatory for all drivers to carry insurance. The politicians in these states have insulted the people by forcing a socialist plan on to them. Worse, these politicians do it in the name of financial responsibility. The argument goes as follows. In our great country, we have a rule that if you are at fault, the courts can order you to pay compensation to everyone you have injured. As a government, we discussed whether to pass a law forcing you to save money just in case you get sued. That would mean, every year, you have to produce your bank account to show a minimum amount in place. The government decided this infringed your liberty. Everyone should be free to spend as much of their money as possible. But you would be financially irresponsible if you do not have some money available just in case you’re sued. So making you pay a few dollars a year to carry insurance is the least invasive way of protecting your privacy. (more…)