Jones & Associates

How is Jones and Associates different from an Insurance company?
• We are an independent Agency representing many different Insurance Companies. As an Independent we can truly shop for our clients and offer them the absolute best coverage for the best rate.

Why use an Independent Agency?
• We represent many different insurance companies who all excel in certain areas of coverage. We can shop amongst the different companies to find the plan which best suits your needs and budget. We represent only reputable companies with financial stability. We believe in maximizing your coverage and minimizing your premium dollars as much as possible.

Why use an Independent Agency instead of dealing directly with an Insurance Company?
• We are not "policy-pushers." We are considered to be your trusted advisor. By allowing us to customize your insurance policy you can maximize your coverage and lower your premium as much as possible.

How is Jones & Associates compensated?
• We are compensated directly from the insurance company. Insurance rates are federally regulated. This means you pay the same price whether you go through our agency or go to the company direct. The benefit from going through Jones & Associates is that you get the added service we provide for no additional cost to you.

General industry probabilities that you may find of interest:
• Odds of your home burning down (total loss): 1/16,000
• Odds of having your automobile totaled: 1/100
• Odds of meeting a $2500 medical insurance deductible annually: 1/25
• Age 40 odds of dying prior to age 65 (unisex): 12%
• Age 40 odds of having a critical illness prior to age 65 (unisex): 30%
• Age 40 odds of being disabled more than 90 days (unisex): 40%
• Odds of a single person needing some level of long term care: 47%
• Odds of a married couple needing some level of long term care: 70%
• Percentage of total mortality in the U.S.A. from the "BIG THREE" (Cancer, Heart Attack, Stroke): 80%
• Number of disability claims that are also critical illness claims (unisex): 3/4
Does Jones & Associates offer automobile and home insurance?
• No. The Insurance Industry is very large. We decided to specialize in a niche market in order to offer the absolute best products, advice, and knowledge to our clients. We believe the quote "Jack of all trades and Master of none" philosophy has gone by the way side.

Why does health insurance cost so much?
• Lots of reasons drive health care costs. Costly technology, state and federal regulations, medical providers, company shareholders, inefficient use of medical care by patients, high pharmaceutical costs, and people with poor health and poor lifestyles, etc.

My family is never sick. Why do I need health insurance?
• If you have any assets to protect at all, you need major medical coverage. Nobody is immune to accident and disease. Certainly a healthy lifestyle is very important. A persons genetic issues cannot be changed. While we can all figure out how to pay off a $5,000 medical bill over 5 years, it works best if the other $25,000, $50,000 or more has been taken care of by major medical coverage. Many people ought to be assuming a little more risk with higher deductibles, therefore realizing lower premiums.

Why is it so expensive to add my family to my employer’s group coverage?
• Group insurance is guaranteed issue by state mandate. This means that if you have a heart attack today and two months from now get a job where group health is offered, you qualify for that plan regardless of health condition. In the individual market there are 51 state mandated health questions and you will be declined for certain health issues. On group plans, the insurance company can only ask your sex and age; no health questions. Their risk is high and getting worse. As result group rates are increasing rapidly. This poses a large burden and concern for all employers.

• An individual, who has group coverage from their place of employment, can save premium dollars by owning an individual medical policy for their dependents vs. paying for dependent coverage through their group health plan.

If I use tobacco does that impact my cost of insurance?
• Yes it does. While tobacco use may not affect the health of a 30 year old greatly, the insurance companies know that if you keep paying your premiums for the long term you will begin to have health problems which they will be responsible for. A company who does not accept tobacco use will minimize their risk and be able to offer you better coverage for less premium.

Is a low deductible plan the best plan?
• For most people going with a higher deductible plan makes more sense in order to keep the premiums reasonable. This allows you to cover other bases that need to be covered, such as life insurance, disability income protection, critical illness, etc.

Is group insurance always the best value?
• The answer varies depending on the particular situation. Generally speaking group health plans are more expensive and premiums increase more rapidly. The key difference being that there are no health questions asked with group coverage.

Do all health insurance companies offer the same coverage and benefits?
• No. Depending on your particular situation, we can customize and tailor a plan to best suit your needs. Therefore, maximizing your coverage and lowering your premium as much as possible.

Do health insurance companies offer nationwide coverage?
• Yes. Some companies offer not only nationwide coverage but worldwide coverage as well.
Are there non-tobacco use health insurance plans available to help save on premium cost?

• Yes. Please contact us for the details. What is a Medical Savings Account (MSA), how does it work, and what are its tax implications?

• Congress passed a law with the purpose of giving taxpayers an incentive for control of the ever-increasing medical costs of today. The incentive is to offer eligible people tax benefits if they sign up for a qualifying high deductible health insurance policy. The goal of congress was to make consumers much more cost conscious about medical services. It works very much like an Individual Retirement Account, by allowing a tax deduction for a contribution to the medical savings account (MSA), which is later used for the payment of medical expenses not covered by the high deductible insurance policy, including the deductible.

The qualified high deductible health policy is one with the deductible of between $1600 and $2400, and for family coverage between $3200 and $4800 per year. The tax incentive is that a single person can make a contribution to the MSA each year equal to 65% of the deductible amount; the deduction for family coverage is 75% of the deductible amount, a maximum of $3600 each year on the highest deductible of $4800. The deduction is taken from gross income, and is not an itemized deduction subject to the 7.5% limit on medical deduction.

Once the money is deposited into the MSA it can then be immediately withdrawn tax free to pay for any medical expense that is not covered by the insurance policy, either because that service is not covered or because the deductible has not been met. This includes dental expenses, vision care and appliances, chiropractic, acupuncture, naturopathic care, medical appliances or any other expense for which a deduction would be allowable as an itemized medical expense. One expense that is not permitted is the payment of the health insurance premiums on the policy. However, premiums for Long Term Care are allowed to be paid from the MSA.

For any year in which there is a balance of a minimum amount in the MSA it will accumulate interest at the specified rate, currently 3% tax-free. All amounts on deposit remain readily available upon request, and will not be included in the person’s taxable income if used to pay a qualified medical expense. The full amount can be withdrawn at any time for a non-medical purpose, but will be subjected to tax and a 10% penalty. After age 65 the full amount can be withdrawn without penalty, but will be subject to income tax. After age 65 the amount can be left on deposit with no requirement for withdrawal for payment of medical expenses not covered by Medicare, including Long Term Care.

To be eligible in Oregon for a MSA, one must have earned income. This would include sole proprietors, partners or members of a corporation who have elected the provisions of Subchapter S of the Internal Revenue Code. Also eligible are the spouses and dependents of a person with earned income. One who is a member of a group health insurance plan would not be eligible, but this would not prevent their spouse and children to be eligible.

As an example: A husband and wife with or without a child or children or either parent with one or more children, one of whom or both of whom are self employed, and have a high deductible health insurance policy with a $4800 deductible. If they have a taxable income between $36,900 and $89,150 this will place them in the 27% tax bracket for federal taxes and 9% for state taxes.

A contribution to the MSA may be made of $3600 for each full calendar year. The tax deduction is allocated throughout the year; with 1/12 allowed for each full month that one has the qualifying health policy. This full amount is deductible from gross income, which will reduce the tax paid for that year by $1296.

Are premiums for health insurance tax deductible?
• If self employed, they are deductible as follows: For 2001: 60%, for 2002: 70%, and after 2002: 100%. This would apply to partners and employees of a corporation for which a subchapter S election is in effect.

Term life insurance compared to permanent life insurance:

• Term life insurance offers the policyholder pure insurance protection. There is no residual value to the policy. It has no monetary value. The premium cost is for the insurance protection only. For most people, term life insurance is very affordable up to age 50. It gets progressively more expensive as you get older and above age 70 can be unaffordable for most people. Term insurance meets the needs for many people.

• Permanent insurance offers many other benefits and has many more options when compared to term insurance. The premiums are generally more expensive. However the policy develops cash value over time with tax benefits. Options such as borrowing against the cash value of a policy are also available. A very important difference between the two is permanent life insurance is just that … permanent. Where Term insurance runs out after the term is up. Permanent insurance is the right option for many people with certain objectives.

I understand having life insurance on the breadwinner in the family. Is there a reason to have life insurance on the "stay-at-home" spouse?
• Yes. If the "stay-at-home" spouse is not insured and the breadwinner dies, the "stay-at-home" spouse would generally need to return to the workplace. This would cause many more needs on the home front. Given the relatively affordable cost for life insurance, we recommend having life insurance on both adults.
I don’t even want to think about buying life insurance. Aren’t I just betting that I’ll die?

• Yes. And the truth of the matter is we all die sometime. The real question is: How long do you want life Insurance? 5 years, 10 years, 20 years, or until you die? The key is to plan and prepare for the survivors so their current standard of living can be maintained. There will be enough stress without the economic burdens of too few assets left after the death.

Why do you recommend life insurance for a family and how much is enough?
• Like any of our insurance products, we like to assess our client’s situation from a logical viewpoint and factor in budget constraints, family, time and age, and peace of mind issues. All insurance is about risk. The more risk you assume, the less expensive your premium. From a needs analysis standpoint, we like to find out about death expenses such as funeral and burial costs, other final expenses, and possible estate taxes. We then look at onetime expenses such as paying off a mortgage, possible college funds, paying off other debts, and other special needs. There are also considerations for living expenses until retirement, and how the shortfall in income that results from a death impacts the family.

• Social Security will help until children are 18 but disappear when the youngest reaches that age. The surviving spouse is on his or her own until age 65. Generally speaking, at retirement age, we stop worrying about dying and start thinking about whether our assets will last as long as we do. Obviously each assessment is as unique as each family. Our goal is to advise you of your alternatives and options.

I hear a lot about business Buy/Sell Agreements. What are these about?
• A Buy/Sell Agreement is funded with life insurance, critical illness insurance, or other insurance products whereby partners in a business agree to buy out the widow(er) of a deceased or critically ill partner and avoid having to create the financing internally which might jeopardize the strength of the business itself. For example, Partner A has a policy on Partner B and vice versa. If either dies or is diagnosed with a critical illness, the other has the funds to pay off the widow(er) and take over control of the business without financial complications. Sometimes this is done for key employees whose skills are not easily replaceable.

I already have health insurance, why do I need disability insurance?
• Major medical insurance pays your doctor and hospital bills, disability insurance replaces your income in the event you are sick or hurt and cannot work. Remember, your most valuable asset is your ability to earn income. Protect it.

Won't Social Security pay me if I am disabled?
• You may be eligible for Social Security Disability benefits but benefits are very limited, very difficult to qualify for, and may not be enough to pay all of your bills and living expenses.

I have workers compensation, why do I need disability insurance?
• If you are hurt on the job, Workman’s Compensation will pay your medical bills. If you cannot work your employer could not continue to pay you your salary and would need to replace you.

I have savings that I could use if I could not work, why do I need disability insurance?
• A disability could last for months or even years. What took years to save could be wiped out in just a few months with a disability.

How long must I wait before disability insurance benefits begin?
• Most disability plans allow you to choose a waiting period before benefits begin. Most common are 30, 60, 90, or 180 days. The longer the waiting period, the lower the premium cost.

How long will I be paid benefits while I am disabled?
• Most disability plans allow you to choose how long benefits are paid. Most common are 6 months, 2 years, 5 years, 10 years, or to age 65. The longer benefits are paid, the higher the premium cost.

prescription coverage?
• No. The only prescription coverage paid by Medicare, your Medicare supplement, or HMO is inpatient coverage only. We do offer a Medicare supplement, which does provide a prescription discount card offering 20-60% savings on prescriptions.

Is a Medicare HMO the best coverage for me?
• Ask yourself these questions:

If the answer to any of the above is yes, you should certainly consider other coverage options. We can help you evaluate your needs.

Why can my Medicare HMO change their coverage anytime they want?
• The law gives them broad authority to offer supplemental benefits and set premium and co-payment amounts as long as those amounts fall within upper limits permitted by law. As long as those premiums and co-payments fall within those upper limits, Medicare has no right to disapprove any increases.

Which Medicare supplement plan should I choose?
• Plans A through J offer a wide variety of benefits. The only way to decide which is best for you is to weigh the benefit vs. cost on each plan. One of our agents can help you balance the scale and choose the right plan.

How much Long Term Care coverage does Medicare pay for?
• None, unless you have a hospital stay of three or more days (not including admittance day). If you do qualify based on hospital stay requirements, Medicare pays for the first 20 days only and then a portion of the next 80 days (you pay $99.00 per day of that next 80 days). Will that cover all of your Long Term Care needs in the future?

Do I need to be concerned about estate planning for tax reasons?
• Practically, if a couple’s net worth is not over the exempt amount, $1,000,000 in 2001, there will be no estate tax in either the estate of the first to die. This will be true for all years through 2011 because the exempt amount as the law exists now will always be not less than $1,000,000.

For any estate for which the net estate can be expected to exceed $1,000,000 it is necessary to be aware that for each year after 2002 that the estate of the second to die cannot exceed the maximum exempt amount, or the amount in excess will be subject to tax. This can be illustrated as follows:

Assuming the same facts above but the net worth is $1,500,000 and all goes to wife upon husband’s death. There is no tax on the transfer to the wife because there is an unlimited marital deduction. All that goes to the wife passes tax-free. Upon wife’s death, assuming the same $1,500,000 goes to the children, there will be a tax due on the excess over $1,000,000. This tax will equal $152,800.

Assuming the same facts concerning a net worth of $1,500,000 if $500,000 goes into a trust, and $1,000,000 goes directly to the wife. When she dies there will be no tax because her estate does not exceed the exempt amount.

For all estates that can reasonably be expected to exceed $1,000,000 consideration should be given to estate planning, by funding the tax liability, which can be done through life insurance.

What are income taxes?
• Income taxes are the taxes imposed upon income for whatever source derived, reduced by the exclusions and deductions allowed by the internal revenue code.

What are estate taxes?
• Estate taxes are the taxes imposed upon the right to transfer property of one person (the decedent) to his heirs. The tax is imposed on the net estate, which equates to the net worth of the estate. The estate is entitled to a certain exemption and deductions to arrive at the net taxable estate. The tax is calculated on that amount and is paid to the Internal Revenue Service.

Can there be both income and estate taxes at the same time?
• Yes. These taxes co-exist, and if any item is subject to income tax, that is paid separate and apart from any estate tax that may also be payable on the amount once it is included in the estate.

What are some of the exclusions from income tax?
• Amounts payable to beneficiaries of the life insurance policies are not subject to income tax. Note however, that the amount of the life insurance can be included in the estate of the decedent if he retains "incidents of ownership" such as the right to change beneficiaries or borrow on the policy.

Typically amounts received under health policies are excluded from income. Income exclusions are based upon specific sections of the Internal Revenue Code, and are subject to change in the tax laws by Congress. The same is true of amounts received under disability policies, that is, it is based upon specific laws. One should check with his tax or insurance advisor for up to date tax treatment. I’ve heard of people buying life insurance to protect an estate from taxes. Please explain this?

• The threshold for estate taxes has been increased from $600,000 to $1 million. Nevertheless, if the estate is primarily made up of assets which are not "liquid", such as land, a business, etc. which would have to be liquidated to raise cash to pay estate taxes, and then life insurance can fill in that gap, to provide cash for taxes without impacting the assets via a "fire sale" which might significantly impact their value. Although the life insurance might be very expensive, it would effectively be paid in lieu of the estate taxes from the government. This is a very common strategy for wealthy people, primarily to protect their heirs.