McEvoy Ins Blog
Early in your life, a term life insurance policy might be just enough for your needs. It offers a low-cost way to support your loved ones through death benefit protection that can help your loved ones get through a difficult period and continue their lives without financial burden when you're gone. As you get older, however, your needs may change and the coverage provided by a term life insurance policy might not be enough. Perhaps you still support dependents with your income, or you’ve gained new debt and don’t want to leave it with your family if you suddenly pass. That’s where the option of conversion to permanent life insurance can help ensure that the legacy you leave is the one you envision.
Thankfully, in many cases, you don’t need to start back at square one with a completely new life insurance policy. Term conversion offers you the option to move from term insurance to a permanent policy. Check your policy to see if you have a conversion option.
Term conversion explainedA term conversion is when you convert your term life insurance policy into a permanent life insurance policy. Most term policies will include a stipulation that allows you to convert some or all of your coverage into a permanent policy within a certain time frame.
Permanent life insurance explainedPermanent life insurance is the general term for life insurance policies that do not expire. Unlike term life insurance, which provides death benefit protection for a specific period of years, permanent life insurance can last for the insured’s lifetime, as long as premiums are paid subject to the terms of the policy. These policies may also offer the potential to build cash value. The cash value for permanent life insurance policies grows generally tax-deferred, which means you don’t pay taxes on any earnings as long as the policy remains active.1 Policyholders can access cash value for a variety of reasons, such as building a nest egg for retirement, boosting the death benefit, or to help supplement retirement income through a policy loan.2
Compared to term life insurance, permanent life insurance usually costs more in premiums but can offer:
No underwritingA term conversion is often much easier than purchasing a brand new policy because the majority of insurance companies let you convert without requiring underwriting again. Underwriting is a process that gives insurers a clearer look at your health history and background when determining your premiums. No new underwriting means that if you have developed health issues between when you first bought your policy and now, they won’t affect your premiums. However, it’s important to note that although premiums won't be affected by changes in your health, they will still be affected by your age.
Coverage fits your budgetIf you’re making more money than you did when you first bought life insurance, your budget may allow you to upgrade your coverage at a higher premium through a permanent policy.
Ability to afford end-of-life costsYour funeral costs can be expensive. Converting to a permanent policy to continue death benefit protection can help your family pay for those final expenses.
The process of convertingConverting your term life policy to a permanent policy is a fairly simple process. Your first step should be to talk to your agent. Policies can be complicated, so having him or her help you understand the detail may make the conversion process easier for you. Next, read over your policy to see if you have the option to convert. Once you confirm the option, determine the length of the conversion period. The time frame that companies will allow policyholders to convert varies. Some will allow it at any point during a policy term, but others will carry a conversion period limit.
After completing these steps, contact your insurance agent to discuss the conversion in more detail. A few things to consider:
Ask about your permanent policy optionsSome companies limit the kinds of permanent policies you can convert your term policy into, so be sure to find out what permanent policies are available to you.
Ask about conversion costsMost term policies can be converted free of charge, but this depends on the life insurance company. Your premium, however, may increase depending on different factors.
Ask about converting in stagesYou may not need to convert your term policy all at once. You might have the option to do it in installments if that better meets your needs.
Finalizing the conversionWhen you’ve discussed the term conversion with your agent and are satisfied with the new policy, you’re ready to make the change.
Spring isn’t just a great time to clean up your house and get it in order, it’s also a great time to revamp your finances. With these few steps, you can renew and review your finances.
Help whip your finances into shapeWhile organizing your finances may seem like a chore, making a plan and completing tasks little by little can help you stay on track.
Gather it togetherOrganizing your financial paperwork is a great place to start. There is no longer a need to keep paper records forever. The IRS recommends you hang on to tax records and other important documents for seven years. You can shred any older statements, bills, expired credit cards, or other records that contain identifying information or account numbers. You could also lighten your wallet or purse by carrying only what you need and leave documents like your Social Security card and passport at home until they are necessary.
Digital documentsIt can be equally important to have a place for digital documents. Consider placing your important files in the cloud with a backup service or use an external hard drive to store files. Or you could do both. Storing files digitally can help cut down on clutter and can be easier to locate and access. You may want to spend some time downloading documents and receipts from financial institution websites, or use a scanner to save vital information electronically.
Examine your debtTo get a better understanding of your current financial situation, you could make a list of all the people and institutions you owe money to, including the amounts you owe. Then, the next step could be to check your credit score to understand how your debt may be affecting your credit. There are a variety of global information and insights companies online with resources that can help you decipher your credit, such as Experian, TransUnion, and Equifax.
You may also consider consolidating debt. Visit Bankrate.com to compare card rates, fees, and terms. There are also organizations, such as the National Foundation for Credit Counseling, which offer help from certified counselors for free or at a low cost.
Look into your coverageAs your life changes, your insurance needs can change, too. Reviewing all of your insurance policies can help you decide if you need more or less coverage. This can be especially important after major life events such as marriage, divorce, or retirement. Two of the policies you may want to look over include:
Life insuranceA review of your life insurance policy on a periodic basis will help you anticipate future changes. You may want to make sure to keep track of the total death benefit and any additional riders you have on the policy. If you purchased a term policy, take note of the year the policy is set to expire, and then you could set a reminder on a calendar to reevaluate if you still need the coverage.
If your policy has a cash value, you may want to be sure to track the value of the policy. You could also call your insurance company to request an "in-force illustration," which will give you a projection of how your policy has performed to date and provide a hypothetical projection on future values.
Health insuranceIf reviewing your health insurance coverage, you may want to make sure you know what your deductible and maximum out-of-pocket costs are, so you can set aside an amount to help cover any potential health care costs. If your plan offers it, consider contributing to a Health Savings Account (HSA) or Flexible Spending Account (FSA) to put aside dollars for medical expenses.
Refresh your budgetA practical and balanced budget can be an essential tool to help you stay on top of covering your expenses, paying down debt, and saving for your goals. You should consider updating your budget to reflect your current spending habits, needs and any life events that have happened recently. If your financial situation has changed, it can be a good idea to create a new budget that reflects your current expenses.
Assess income and expenses
Before you can make a budget, you should to know where and how you spend your money. Mobile apps like Mint.com or Pocketguard help make it easy to stay on top of your personal finances. Each application offers different features that can help with budgeting, bill payments, paying off debts or monitoring your credit score.
Review financial goalsReviewing your goals from the past year can help you adjust your budget for the future. If you accomplished a long-term goal like paying off your car loan, for example, you may have extra money to use for new goals. When spring cleaning your finances, be sure to see where you are in terms of previous goals and decide if you need to renew them or set new financial goals, such as paying off credit card debt, saving for a house, or preparing for potential emergencies by starting an emergency fund or bolstering the one you have. Once you know what your new long-term financial goals are, you can then set some mid-term financial goals for the next two to five years, as well as short-term financial goals for this year.
Create a new budgetTo create your budget, subtract your total expenses from your total income each month. If the balance is in the red, you may need to cut back on your spending or generate additional income. Like most things in life, budgeting is about balance. Once you know how much money is coming in and going out, you can evaluate where you need to make a change. It’s important to balance spending, paying down debt, and saving for your future.
Handling finances as a single parent can be a challenge. It’s easy to feel overwhelmed when you’re on your own. Here are seven financial tips to help you get a handle on your money and help you build financial security.
Create a new budgetA budget is an essential tool to help you stay on top of paying your expenses and debt and saving for your goals. Knowing where your money is going and when it’s being spent starts with math. Figure out your monthly income and your expenses on paper, a spreadsheet, or in a financial app. You can determine this by taking a look at your pay stubs and bank statements to see what has been deposited into your accounts. If you have any additional income from a part-time job, child support, or some other source, make sure to include that money as well. When you know your income, write down a list of your expenses based on your monthly bills.
To create your budget, subtract your total expenses from your total income each month. If you have some money left over you could put that in savings or use it for something else. If the balance is in the red, you’ll need to cut back on your spending or generate additional income.
Limit your credit card debtAs a single parent, it’s a good idea to break the habit of relying on credit cards. Interest rates and fees can add significant debt to your finances, especially if you get behind on payments. If you need money, consider taking a loan from a relative. Your employer may also offer employee loans that get paid back through paycheck withdrawals at no interest. Check with your human resources department to find out if that’s an option for you. If you must use a credit card, make sure you get a card with the best possible interest rate. Visit Bankrate.com to compare card rates, fees, and terms.
Set up a safety netIt’s smart to create a financial safety net that includes three to six months of expenses to help see you through a crisis. Unexpected events can have a huge impact on your financial future if you aren’t prepared.
Create an estate planTo make sure your wishes are carried out after you’re gone, you need to create an estate plan. First, you’ll need a will that specifies who will take care of your children if you die and how your assets will be passed down. If you already have a will make sure it’s updated. If you don’t have a will, you should create one with help from an attorney who can ensure you have the right guardians for your children designated, beneficiaries chosen and you’ve picked an executor you trust, who will oversee the implementation of the will.
Along with a will, you should also draft a power of attorney document, which gives someone the legal right to make decisions on your behalf if you are unable to do so. For more on estate planning check out our blog on estate planning checklists.
Consider life insuranceBuying life insurance is a smart way to help protect your family, especially if you’re a single parent. If it’s your first time shopping for life insurance, you should figure out how much life insurance you need for your family. Be sure to factor in the cost of caring for dependents, such as your children, as well as their cost of living after you’ve gone. Total your monthly bills and fixed expenses, and make a list of what you provide for your family. This should include necessities like food and medical costs, but also money for vacations and other quality of life needs. There are several kinds of life insurance to consider, from term, to guaranteed, to indexed universal life. To find out more about your life insurance options, check out our blog, Finding the right life insurance match for you.
Think about getting disability insuranceAs a single parent, you don’t have a partner’s second income to shoulder expenses if you’re suddenly unable to work. Check with your employer to see if they offer disability insurance. If they do, you could receive a reduced income when you put in a claim. If your company doesn’t offer disability benefits, a life insurance agent can help you set up the insurance.
Know what tax benefits you qualify forSingle parents are eligible for specific tax benefits, exemptions, and credits, so be sure to do your research on what you might qualify for. Visit the IRS website to learn more about different tax credits you may apply for based on your situation.
If it seems like your grocery bill is higher than last year, it probably is. Inflation is up 7% over the past year – which is the fastest increase since 1982.1 If you’re trying to eat healthier without breaking your budget, consider the following tips:
Set a budgetYour budget is a tool to help you stay on top of how much you’re paying for your food and other items in your life. To find out how much you should be budgeting for groceries, it helps to review your previous month’s purchases. If this amount still seems right for you, use it as a framework for future grocery budgets. If the amount seems too high, recalibrate based on your income and other necessary expenditures.
Create a meal plana meal plan can help you save by keeping your shopping list focused on the foods you plan to make. If you need some inspiration, the U.S. Department of Agriculture offers monthly food plans that can be used as guidance for grocery spending.
Make a shopping listIt may seem like a no-brainer, but using a shopping list when at the grocery store can help in some big ways. Having a list can mitigate the potential of you forgetting an item and needing to go back to the store. It also helps stay true to what you need instead of purchasing items that aren’t part of your meal plan. Apps like AnyList can be a great way to keep your shopping list at your fingertips. You can even meal prep within the app.
Order aheadMany grocery stores offer the option to order your groceries online and pick them up - all without even entering the store. This can be a great way to ensure you don't go rogue on your shopping list and you keep your budget (and diet) in check.
Waste not, want notIt’s happened to all of us. Despite our best intentions, we end up with fruits and veggies at the back of the fridge rapidly approaching their expiration date. Instead of letting that food go to waste, consider a frittata or a hearty salad to use up extra veggies. Fruits that are nearing their expiration are the best for baking and making jams. Consider cooking down berries for a flavorful oatmeal topping, or freezing your extra fruit for smoothies.
American consumers’ top three financial concerns are health coverage, savings goals, and living expenses.1 What if we told you their fourth financial concern, life insurance, had the potential to solve for the first three?
Let’s take a look at some reasons to LOVE life insurance and what it could do for you.
L – Low costMany don’t realize that life insurance doesn’t have to break the bank—there’s a policy out there that can fit your financial situation. Did you know, that for the price of three cups of coffee per month, you could buy a term life insurance policy?2 While affordability is important when considering life insurance, it’s also important to look beyond the price. What benefits does this policy include? How can it help me financially in the long term?
O – OptionsThat’s why a policy with flexibility can be important. We know our clients have individual needs and financial goals. And, as your life changes, your needs may change as well. Many life insurance policies have different features such as living benefits, cash value growth potential, and benefits you can use while you’re alive that may fit your unique life needs.
V – Various life stagesAs you go through the different stages of life, your financial needs and goals can change. Whether you’re graduating college, getting married, buying a house, starting a family, or planning for retirement, all of these momentous occasions require more financial responsibility. Life insurance can walk alongside life with you and help you during these special milestones.
E – Extra protectionStudies of cancer survivors have suggested that between 33% and 80% of the survivors have used savings to finance medical expenses and between 2% and 34% have borrowed money to pay for their care or have medical debt.3 While the main benefit of life insurance is the invaluable death benefit protection it provides, many policies also come with living benefits, which may be used for a variety of expenses—including covering the costs of a major medical illness.
Your retirement is a time for peace and calm, but you don’t have to wait until your golden years to find relaxation. Achieving work-life balance before you retire can help you stay healthy both mentally and physically.
If you are looking to start reaching work-life balance now, consider the following:
Check-in with othersIf you have close bonds with your coworkers, transitioning to retirement may be emotionally difficult for you. But leaving the workforce doesn’t mean you have to completely sever ties with the people you’re fond of. Keep those connections strong by planning to meet up for dinner, game nights, or coffee.
In-person activities aren’t the only way to enjoy people’s company. Zoom and other online chat platforms are a great way to stay connected to friends and family who are far away.
Review your financesBefore you retire it’s a good idea to talk with a financial professional to help you create a good retirement plan. A financial professional can offer support and guidance, and help you navigate any challenges that may arise before and during your retirement. Having a plan in place may make things easier as you wind down your time at work. It can allow you to breathe a little easier and enjoy your days.
Life insurance is an important part of financial planning for everyone in your family. It’s designed to help protect our loved ones when we pass away, both financially and emotionally. Although most of us tend to imagine individuals when we think about life insurance buyers, coverage can also be extended to your children and other family members to help make everyone’s lives a little easier when a death occurs.
How to purchase policies for extended familyYou can take out a life insurance policy on an extended family member or someone important in your life, such as a romantic partner or business partner. To do this you’ll need to get the person’s consent on the policy. In other words, you need him or her to know what you’re doing and you need to get their permission via signature to collect vital data, such as vehicle records, prescription records, and relevant health and life insurance information for the application. The person will typically have to undergo a life insurance medical exam as well.
Another important part of the process is demonstrating insurable interest, which means you need to be able to show proof that you will suffer emotionally and financially if the person dies. Typically, your spouse or parents do not have to prove insurable interest when purchasing policies. Other connections, such as a business partnership or a girlfriend/boyfriend relationship will need that documentation. Your insurance company will want to verify that there’s a true relationship between you and the person you want to cover.
It’s important to note that you cannot buy a life insurance policy for anyone you want. An acquaintance or stranger will be rejected by your insurance company.
Why you might want to buy coverage for othersThere are many reasons why you might want to cover people with life insurance, depending on who they are, their relationship to you, and their situation. Here’s a breakdown of potential insurees:
Spouse or partnerLife insurance is an important part of securing a future with your spouse. It’s a good idea for you to have a policy that can cover:
ParentsAging parents often come to depend on their children in their golden years and caring for them comes with financial responsibility. Buying life insurance for your parents can provide you with financial protection if they leave behind unpaid bills when they die. Some of the financial considerations that life insurance can help cover include:
A policy for a child would lock in premiums at a young age, protect your child’s insurability, and could be used for investment or savings for your child’s future expenses. However, while life insurance rates will go up as your kid ages, chances are they won’t ever be priced out of or denied a policy when they need it.
If you have an older child, and you cosigned student loans, mortgages, car loans, credit cards, etc., you may want to take out a life insurance policy to pay off those loans if your child dies prematurely. Conversely, as a son or daughter with a co-signed loan, you could take out a life insurance policy on your parents to make sure you can cover the costs on the money borrowed, should they pass away.
You can insure your child by purchasing a children's life insurance policy or adding a child rider to your own life insurance policy.
Siblings and other relativesThere are some scenarios in which covering your brother, your sister, your aunt or uncle, or even your cousin makes sense. If your sister, who is taking care of your elderly parents, suddenly dies, for example, your parents may not be able to cover the care they need. To ensure their continued support, you would purchase a life insurance policy for your sister and name yourself the beneficiary. That way you would get the money to help care for your parents.
If you are considering a life insurance policy for your children or an extended family member, it’s a good idea to make an appointment with a financial professional to understand your options and develop a strategy.
Planning your financial strategy can be difficult and complex—knowing where to start is often the hardest part. How do you know if you’re making the most of your finances? Visiting with your financial professional is always a great place to begin. Before doing so, you may want to evaluate your finances and make sure you’re not making any of these four common mistakes.
Your money isn’t accessible enoughIt’s important to save money for times of need or emergency, but where should you put it? Should the unexpected happen, you may want access to your funds so you can support yourself and your loved ones. What types of restrictions or limitations does your account have? During these times of emergency, would these restrictions make it hard to access your funds? While different than savings accounts, some life insurance policies can offer living benefits to help cover the costs of qualifying illnesses. Consider an option that provides the flexibility you need and that may offer other benefits you’re able to use.
Your money isn’t “working hard” toward your financial strategyAccording to the FDIC, the average interest rate for a savings account is 0.09%.1 Flexibility and accessibility are both important, but so is maximizing your funds and making your money work smarter and harder. How can your money potentially accrue more value while sitting in an account, better preparing you for the future? Knowing your account’s interest rate may be important—but are there other options out there that could offer you more? While life insurance isn’t the same as a savings account, indexed universal life insurance can offer the opportunity to grow cash value at potentially higher rates while remaining accessible through loans and withdrawals.
Your money suffers from feesProtecting your money can be difficult. Make sure you’re familiar with the various fees being charged to wherever you may be keeping it. Some banks charge consumers, for example, if their account dips below a certain balance. There also may be annual fees charged for simply doing business with them. Consider options that offer you the flexibility you want with the breathability you need that keeps your money safe from a multitude of fees.
Your money isn’t being leveragedIf the unexpected were to happen, what would your beneficiaries receive today? In a savings account, your beneficiaries would likely receive the money as is with any interest accrued. Consider options that offer strong cash-value growth so you can maximize your legacy for your beneficiaries and loved ones. Life insurance immediately leverages funds into a larger, generally tax-free death benefit, allowing you to leave more behind.
Wherever you may keep your money, make sure it’s working toward your financial strategy. Keep your options in mind and determine what will set you up best for your future and the legacy you leave.
Values are the glue that holds your family together. It’s important to share, document, and celebrate those values so that when the time comes, your family will continue living out the legacy you established. Those values may include how you handle your finances as a family, so it can be important to be open when discussing money with the people you love. Talking about financial planning can sometimes make people feel uncomfortable, but meeting with your spouse, children, or grandchildren to discuss financial decisions can better prepare your family for the future.
If you’re ready to have a family meeting, consider these tips to help you start the conversation.
Before the meetingIdentify the main topic
Don’t try to cover every financial topic at once. Instead, you can focus on one issue that’s important or recent. Sticking to one topic can help keep the conversation focused, and prevent family members from feeling overwhelmed.
Decide who should be involvedFor the initial meeting, you may want to keep the discussion small. Who you invite depends on the sensitivity of the topic, as well as factors such as family structure and distance. It’s a good idea to only involve the key people in the first meeting. You can always expand the circle in subsequent meetings. If you aren’t sure who to involve, consider asking for input from your financial professional.
Write down what you hope to accomplishWhen you have financial discussions with your family, the goal should be to make some kind of agreement or promise on the topic presented. Achieving this could take several meetings, so it’s important to be patient.
Create an agendaYou could ask your family what they think would be beneficial to cover in the meeting and then write down those points. The finished agenda then can be shared with your loved ones in advance.
Consider spending time with your family beforehandTo help ease tensions before the meeting, you may want to plan a dinner to help “break the ice.”
Talk to your financial professionalBefore the meeting, you may want to get some advice from a financial professional and discuss the family meeting goals.
Schedule the meetingTiming your meeting is important. You may want to avoid having financial conversations during big events, such as holidays, as they can be stressful. Instead, you could choose a moment when everyone is in a good place in their lives. Pick a date that works for all your desired attendees and a neutral, comfortable location.
Meet and communicateTalking about finances can feel strange, so it can be important to do it in a way that’s pleasant and agreeable for all involved. When you meet with your family, it’s important to lead the conversation in an open, honest, and focused way.
If it’s your first time shopping for life insurance, there’s a good chance you may not know which option is the right one for you. Finding the best match requires some homework before you make your choice. Here’s a breakdown of the various life insurance options to help you figure out which one fits best.
Term life insuranceTerm life insurance has level premiums that last for a set number of years (the term). This life insurance includes a death benefit in the form of a lump sum of cash that’s paid out to a beneficiary by the life insurance company if you die while this coverage is active. This lump sum can be used for a variety of things, such as burial expenses, mortgage, and debt payments, living expenses for your family, or donations, generally tax-free. Additionally, you may have the option to convert your policy to permanent coverage before the term ends. After the term expires the policy may either terminate or automatically renew annually. If your policy is slated to terminate at the end of the term period, then in order to continue the coverage you may renew for another term or shop for a new policy.
Guaranteed universal life insurance
Guaranteed universal life insurance is permanent coverage that provides the ability to guarantee a death benefit to any age up to a maximum age as stated in the policy, as long as the premiums are paid and the policy remains in force. Guaranteed universal life is not designed to generate cash value.
Indexed universal life insurance (IUL)Indexed universal life is insurance that offers death benefit protection, and the opportunity to earn tax-deferred interest on the interest credits linked to the performance of one or more stock market indices chosen. This feature gives you the potential for cash value accumulation plus, it offers downside protection in a poorly performing market because you do not participate directly in the stock market and the credited interest rate is never less than the minimum interest rate or zero percent (floor). The upside is limited by either an index cap rate or an index participation rate. The index cap rate is the maximum interest rate that could be credited to the policy. The index participation rate is applied to the index change in order to calculate the index credit. The premium paid in the policy is not directly invested in any index or the stock market.