In connection to the previous entry about Risk Management, here are other insurance plans you can consider.

Long Term Care (LTC) Insurance

Long Term Care (LTC) insurance is a form of insurance that pays you a monthly benefit if you are no longer capable of performing two of the six daily activities of living. Whereas some critical illness policies will pay out a one-time lump sum, a specifically designed LTC policy will provide you with an income stream potentially for the rest of your life.

There are basically two major options when designing an LTC plan—a guaranteed predetermined monthly benefit, or a reimbursement plan that requires you to submit receipts as evidence for reimbursement.

Payment of Premiums – You have a couple of choices to consider when designing the payment options for an LTC plan. You can either pay the premiums for the rest of your life (or until you go onto claim), or you can have a fixed time period to make the premium payments, but then you are still covered for life. You also have choices to make in terms of how long you would like to receive the LTC benefit. You should always own and pay for LTC plans personally.

Smiling businessman came to an agreement with doctors.When To Consider LTC Coverage

Most people think about LTC coverage later in life, and your ability to qualify for this type of insurance decreases as you get older. The earlier you apply for this type of insurance, the lower the premium that you will be paying. When building a doctor’s retirement and estate plan, I usually run some “what if” scenarios, which include throwing in some unexpected healthcare costs later in life. If the plan survives without the need for LTC coverage, then you are considered to be “self-insurable.” If the plan does not survive for the duration of the unexpected healthcare costs, then we know we have a gap to fill in the plan.

Life Insurance

Life insurance is an important part of many wealth planning strategies. You can use life insurance to create, preserve, or equalize an estate.

Life insurance coverage essentially falls into two categories: Term life and permanent life.

Term Life Insurance

Term life insurance provides life insurance coverage for a limited time period, which is reflected in the word “term.” The period for the insurance coverage will vary based upon the client’s requirements.

Term life insurance is a type of insurance product that is developed to address a need that is temporary in nature, in which there is no permanent need for life insurance coverage.

If a claim for life insurance is made while the coverage is in force, the benefit approved for under the insurance contract is paid out to the beneficiary listed in the policy. There are a variety of term insurance products in the marketplace, some of which expire at the end of a specific term and others that can be renewed for multiple terms. Typically, each time a term is extended for coverage, the premium will rise to reflect your increase in age.

Term Life Insurance: Convertible Option

Most term life insurance policies have what is called a “convertible option,” which allows the person whose life is insured the opportunity to convert the term life insurance product to a permanent insurance product without the need to provide evidence of insurability. The cost of the permanent product is usually based on the age of the life insured at the time of the conversion.

Term Life Insurance: Beneficiary Options

Typically in the case of spouses, the beneficiary that you declare on your policy is your spouse and vice versa. If one of you were to pass away unexpectedly, the proceeds of the life insurance can be used to pay down debts, such as a mortgage, or to create an income stream for the remaining spouse. If you plan to designate a child as a beneficiary, it is highly recommended that—if the named child is under the age of 18—you leave it in a trust for the child and identify a guardian of that trust.

You can also own term life insurance from inside your professional corporation. If you are going to own life insurance inside your professional corporation, it is important that the corporation be the owner, the payer, and the beneficiary of the policy. You continue to be the life insured whether or not the policy is owned personally or by the corporation. Upon your passing, corporately owned term life insurance will pay out the death benefit directly to your professional corporation.

Fortunately, proceeds from life insurance which are corporately owned are paid into what is called the “Capital Dividend Account” (CDA). The CDA is a notional account set up for the non-tax portion of capital gains as well as for life insurance proceeds. The next step is for the remaining shareholders to declare a “capital dividend,” and the money inside the CDA is then paid out tax free to the shareholders.

If you are looking to create a living legacy, you can also create and designate a family trust as the beneficiary of your life insurance policy.

Term Life Insurance: Summary

Term life insurance is useful to address a temporary need. The initial cost of term insurance is attractive when compared against permanent insurance. However, the increasing premium costs associated with term insurance present a significant issue, one that needs to be considered during your purchasing decision process. The use of term insurance to address a permanent need creates a considerable risk to you because all term insurance policies have a maximum age at which the plan fully expires without the opportunity to renew.

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