Life Insurance for Physicians
Understanding the Basics In And Out
Beforeunderstanding the basics, it is important to understand that insurance is meant to compensate the loss of income in the event of death. When the amount from the policy meets the investment assets, it should be approximately equal to 80% of the deceased’s income. In instances where income is not fixed, it will only be smart to over insure.
Nowthe question that arises is that whether the policy should be owned by the individual or the corporation. Previously, if the corporation owns the policy and is paying the premiums, the cost of buying insurance would significantly reduce. The surviving spouse receives the stock equivalent to its market value once the corporation collects the policy’s face value.
However,ACE adjustment now establishes that a certain part of the insurance proceeds should be recognized for alternative minimum tax purposes. Rules state that any corporation with its gross receipt exceeding $7.5 million will not be entitled to income tax advantage for any life insurances it owns.
Types of Insurance:
Asthe name implies, this policy provides coverage for a certain amount oftime. When the period ends, the coverage terminates and the policy renders no face value. An advantage associated with it is that it offersinsurance with the lowest possible premiums. However, premiums increasewith the increase in the beneficiary’s age.
Whole Life Insurance
Thispolicy provides lifetime coverage. The premiums must be paid under limited payment, continuous premium or single premium plan. A great appeal is that it allows the maintenance of a savings account apart frominsurance.
Essentiallysimilar to a whole life policy, this one is an individual contract where the insurer unifies cash accumulation as well as death protection.However, the rates of return are more competitive as they are guaranteed over cash value. More flexibility can be secured by making adjustments in the protection of needs and saving of the policy holder.
Itis also a combination of security and life insurance. However, what makes it different from others is that the investment portion of the premiums can be used in common stocks, bonds or money market funds, etc.This helps secure great flexibility in terms of investment for the policy holder. The policy’s value does not fall below a minimum amount and cash values aren’t guaranteed.
Thisis a policy with mix and match features, labels and policy types. As the name indicates, it combines the features of variable as well as universal life.
Choosing the Right Type of Insurance Policy
Theplanning should match the policy for which it is purchased. Also, it should be selected to provide coverage for a certain time period such astill your children complete college or mortgage is paid. It is recommended to opt for term policy in such scenarios.
Selecting the Right Policy
Some points that come into play for the selection of the right policy are briefly listed below
Costanalysis is something that cannot be emphasized enough and your job is to calculate a policy for every $1000 of coverage. Expenses other than the premium should be taken into account such as an increase in dividends, cash value, premiums, earnings that are lost on cash value and so on.
Selecting Qualified Insurance Provider
Onething that can certainly work in your favor is selecting an insurance company that is qualified. People may want to sweet-talk you into policies but you have to be wary of defaulters. Find out about the financial stability of the insurer and make sure it can boast of good ratings from the A.M. best company. The rating should only be somewhere between A+ to C.
Make a Checklist
Itwill only work in your favor to create an evaluation checklist. Remember, this checklist can be an invaluable assistance when comparing or reviewing policy prices.
Replacing Life Insurance
Thereare often instances when insurance companies offer plans that are attractive and beneficial than the ones already in place. You can replace the old one with the new. However, before dropping the old one, make sure there are no issues with insurability, the commission or salescosts are carried forward and that the new policy has an incontestability period during which the insurance company is denied theright to raise the premium.