5 Reasons The LGBT Community Needs Life Insurance
October 1, 2018 by David Rae
Some of the country might define LGBT relationships as non-traditional (screw them), and with that in mind, we have some non-traditional needs and uses for life insurance. The typical and obvious reasons people choose to shop for life insurance often include having a mortgage, kids or other dependents and estate planning. Even if none of these apply to you, there still may be a place to use life insurance as a vehicle to help you reach your financial goals. Life insurance could even provide you with protection and benefits to use while you’re alive.
While many of the benefits I describe below could apply to anyone, I would like to share with you some specific reasons why you could benefit from having your own life insurance policy. This applies to single individuals and couples, even without children within the LGBTQ community. We are about life insurance benefits that you don’t have to die to use.
For singles, retirement planning and aging will likely be more expensive. Without children or other family members to count on during your golden years, who will be there to care for you and ensure your well-being? Long Term Care (LTC) insurance may be the answer for individuals who find themselves in this position but it can be expensive. The good news is that some newer life insurance policies can help cover the cost of LTC. Additionally, couples without children are also at risk of having higher expenses. The death of a spouse could potentially have devastating effects on the finances of the surviving spouse. Will you be able to afford the rent or mortgage on your own if your spouse unexpectedly passed away today?
Do you make too much to contribute to a Roth IRA? Perhaps you are already contributing the maximum amount. The current $5,500 contribution limit may make it hard to save enough money for a comfortable retirement if this is your only retirement investment account. Cash Value Life Insurance could be a great addition to your retirement income strategy. If used properly, it could potentially be a great way to provide more tax-free income during your retirement. Another consideration is the “Rich People Roth”, which has no income or contribution limits. This tax-free income may also allow you to save more money on taxes when drawing retirement income from things like a pension or 401(k). If structured properly, and with the passing of the proper amount of time after tax returns, this type of IRA can be quite enticing.
Do you want guarantees on the money you’ve spent your life accumulating? Many permanent life insurance policies have a minimum guaranteed rate of return that isn’t available on things like stocks or mutual funds. Additionally, you may want to look at a policy with a fixed rate of return. Many of the available current rates are quite a bit higher compared to fixed-rate bank accounts or Certificate of Deposits. This can be an important part of a well-diversified and smartly managed financial plan.
Are you behind on your retirement savings? When it comes to life insurance, a big benefit really comes in the fact that you don’t have Internal Revenue Service (IRS) contribution limits, like you do with an actual Roth IRA. Plus, you still get the tax-free growth and distribution if the policy is handled properly. That means you can sock away a larger amount of money and hopefully help your financial plan catch up to your desire for a comfortable retirement.
You want insurance that will protect and benefit you (without having to die first). Most people think of life insurance and protection for someone else. New policies often come with benefits, which can protect you while you are alive. Those may include terminal Illness, chronic illness, long-term care, disability and critical illness, to name a few. Basically, the short version is those benefits would kick in if you ran into any of those issues. Additionally, companies now provide more options in which to utilize the policy. Let’s be honest. Not many of us want something we have to die to use. Casket shopping just doesn’t have the same appeal as strolling down Rodeo Drive.
As a gay Certified Financial Planner™, I really like my clients to have options. A policy like this allows clients to spend $1 and have several ways for it to provide valuable benefits. I want everyone to live long-and– healthy lives but I know that won’t be the case for everyone. The best-case scenario would be for you to make it to retirement, in good health and use the cash value to help subsidize your retirement income. The worst case would be that you died young but your beneficiaries received the death benefit. The somewhere-in-between scenario would be that you experienced a temporary health glitch but were able to use the policy’s benefits to help you get through that difficult time.
News for those Living with HIV
There is now life insurance specifically designed for those living with HIV. I’ll provide more in-depth information on this topic at another time, but for now, I wanted to share that those living with HIV now have the ability to get life insurance on the open market. A few companies are being a bit more liberal with their life insurance underwriting and treating HIV as an ongoing illness (raising the cost of insurance). This may not sound like a big deal, but in the past it was essentially impossible to get life insurance once you had been diagnosed with HIV. Your application would be automatically declined.
I often hear, “I’m gay so I don’t need life insurance.” I have also heard stories of people’s applications being rejected essentially because they were gay. But now, life insurance isn’t just about dying. There are living benefits, and tax benefits, many people don’t know about or aren’t taking advantage of. As with anything, there are pro’s and con’s. With that in mind, a cash value life insurance policy may deserve a place as part of your financial plan. As always, talk to you trusted financial planner to see if this may fit your specific situation, and how this compares to other things you are doing to protect yourself.
