Financial Planning

Your computer has a back-up system, but what about your financial plan? When developing a financial plan, it is wise to have a dependable backup system in case of an unfortunate event. Insurance is one of the most effective and dependable systems. The forms of protection it provides, including life, income, and long-term care, should be seriously considered when establishing your financial plan.

Begin the planning process by meeting with your Financial Advisor and setting specific financial goals for your future. These goals could range from retiring by age 55 to traveling around the world to passing on wealth to your children or favorite charity.

The next step involves reviewing your current assets. Ask yourself: "Are my assets being utilized effectively to reach my financial goals?" and "Can these assets be repositioned to achieve these financial goals?"

The protection of your assets is an important component of your financial planning process. Insurance can be the mechanism to protect these assets so they can be used to achieve the desired financial goals.

Insurance can be used in many ways. For example, life insurance protects the heirs of the insured in case of death. It may be used strictly for protection, known as term life insurance, or to build cash value in the form of whole, universal, and variable life insurance policies.

Whole, Universal, and Variable Life Insurance

The differences between cash value policies are based on the premium and the investment structure. Whole life has a structured premium for a certain number of years, or for the life of the policy (full pay), and pays dividends that can be reinvested either in a taxable or nontaxable manner.

Universal life policies credit an interest rate that typically changes annually. Premiums paid by the policyholder can be skipped at any time, as long as there is sufficient cash value in the policy to pay the cost of insurance.

Finally, variable life uses separate sub-accounts similar to mutual funds. The policyholder may choose the accounts where they'd like the premium to be allocated. Variable life can be structured as either a whole life or a universal life policy. Most variable life policies are offered as universal life plans.

Life insurance used for retirement utilizes the cash value. When used for estate protection, the death benefit becomes the important feature, because Uncle Sam wants cash to pay for the estate taxes.

Disability Insurance

Insurance may also be used to protect income. This type of insurance is known as disability insurance. Disability insurance replaces income when the insured is unable to work. Some policies are more restrictive than others depending upon the definition of the occupation within the policy. While there are some policies that pay benefits if the insured cannot work at their regular job, other policies only pay when the insured cannot work any job.

In order to qualify for disability benefits, the insured must meet the definition for disability and be certified by a physician. Benefits are paid based on contract specifications.

Long-Term Care Insurance

Protecting your assets may be difficult because of long-term care costs. Long-term care insurance pays benefits when the insured enters a nursing home or requires in-home health care. The primary reason for purchasing long-term care insurance is to prevent draining wealth from the insured or their relatives.

With this type of policy, the insured may choose a daily benefit, the number of years of the daily benefit, a waiting period, and a cost-of-living adjustment. Similar to disability insurance, a physician must certify that treatment by a health caretaker at home or a stay in a nursing home is necessary. Medicare pays only limited benefits under specific terms and is not usually adequate to cover long-term care needs.

Remember, when planning for the future, you should seek the advice of an attorney, accountant, and your Financial Advisor. These professionals can assist you in developing your financial goals, reviewing your assets, and protecting your assets from undesirable events.

ENB Associates Inc. is a wholly owned subsidiary of Evans National Bank. Securities are offered by O'Keefe Shaw & Co., Inc. Member NASD, and SIPC. Products purchased through O'Keefe Shaw may lose value, are not deposits with obligations of, or guaranteed by Evans National Bank or affiliates and are not insured by the FDIC.

Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.