Reasons to Buy Term Life Insurace

vdeWe all have different needs and wants in our lives, but one thing that most of us need is some type of life insurance policy. We all want to believe we are invincible and nothing will ever happen to us. And I hope nothing bad ever does, but according to Guinness World Records, (this is straight from their site) “the greatest fully authenticated age to which any human has ever lived is 122 years 164 days by Jeanne Louise Calment (France). Born on 21 February 1875 to Nicolas (1837 – 1931) and Marguerite (neé Gilles 1838 – 1924), Jeanne died at a nursing home in Arles, southern France on 4 August 1997.” This just illustrates that we are not invincible and we only get to enjoy this lifetime for a relatively short period of time so we might as well be prepared.

There are generally 3 types of life insurance: Term, Whole Life and Universal. I’m going to talk a little about term today. It’s what my wife and I personally have (as well as some whole life) and it’s what I believe the most in. Why buy life insurance? Here’s the short answer highlighting some of the main reasons of why you should consider buying life insurance:

  1. Pay the mortgage for your spouse
  2. Replace your income so your spouse can pay the monthly bills
  3. Pay any debt you may have so your spouse doesn’t have to worry about it
  4. Pay for funeral costs
  5. Finance future needs such as a child’s education or spouses retirement
  6. Continue a family business

Term Life Insurance

Today I’m going to go over term life insurance. It is what it sounds like. It is designed to last a specific period of time. At the end of that time, or when the term is up, the policy is finished. Typically at the end of the term the policy is expired and you pay no more premiums and you do not get any money back. There are variations of a term policy that allows you to get money back and renew it etc., but I’m only going to talk about a straight term. The different variations should be discussed with your agent to see what fits your needs. Term policies can be 5, 10, 15, 20, 25, or 30 years long. You get to choose the period of time you want the policy in force based on your personal situation.

Term policies are also the most affordable policies mainly because they expire at the end of the term and you get nothing back when it expires. I know that doesn’t make it sound like a smart choice, but it can be. For example:

Say you are 30 years old, are married, have a house with 20 years left on the mortgage and a 5 year old child. One option would be to get a 20 year term policy to last as long as the mortgage and long enough to get your child through college. After that you might not have a need for as much life insurance. Let’s say your mortgage is $100,000 and you want your spouse to be able to pay off the mortgage and have $20,000 a year to raise your child if something were to happen to you. $20,000 a year for 20 years plus $100,000 mortgage totals $500,000. That’s a lot of money, but that is a realistic number that your spouse would need if you didn’t make it home the next day.

A lot of people see that $500,000 and think there is no way they can afford that kind of insurance policy. You can. A healthy 30 year old non-smoking male or female should be able get a policy like this for less than $25 a month. I am willing to spend $25 a month for myself and $25 a month for my wife to make sure that we are financially taken care of is something happens to one of us. I probably spend more than $50 a month between food spoiling that I don’t cook in time or snacks at the gas station. If I can afford to do that then you better believe I will find $50 to make sure my family will be taken care of. If you are wanting to get a policy that gives you money back when it expires you will have to pay a little more, but you at the end of the term you will get back all your premiums that you paid. That’s why term policies are so attractive. A lot of coverage for a low premium.

Many people still don’t have life insurance to take care of their families. There are a variety of reasons for this. Below I’ve listed 3 of the most common excuses people give me when I talk to them. Remember, life insurance is one of many tools designed to help your family prevent a financial catastrophe.

1. I can’t afford it.

  • I already showed you it can be affordable. You don’t even need to get the exact amount you need. Just by having some insurance to make it a little easier for your family is better than nothing at all.

2. I don’t need it

  • Do you have a spouse and/or child? Do you think you may someday pass away? Then you should at least talk to an agent about options out there. Even if you’re single, someone will have to pay your funeral expenses if you pass away so you might want to look into getting some insurance as well.

3. I don’t have time to meet with an agent.

  • Really? You don’t have a half hour? How long is Chicago Fire or whatever your favorite show is? An agent will go to you and is willing to work evenings and weekends. Most of us can find a little time. Now there are even term policies that can be issued within 24 hours and don’t require a medical exam. The policies with no medical exams will save you all kinds of time.

Now, let’s go back to being invincible. We’re not. None of us are. We probably all have been to a benefit for a family that had a premature death that created not only an emotional hardship, but a financial one as well. That’s why there was a benefit in the first place, because the family didn’t have life insurance.

The bottom line, talk to an agent about life insurance. Just start the conversation. Find an agent you trust that has access to all the different options so you get what you need.

What Are Some Advantages Whole Life Insurance Has Over Other Life Insurance

cvbWhat do you consider an advantage?

Before considering some advantages whole life insurance has over other life insurance, it’s important that you know what you consider an advantage to be.

What’s more important to you, the return ON your money or the return OF your money? Are guarantees important to you or do you prefer risk?

Return ON or return OF

If you’re looking for a high return on your money, there is no advantage to life insurance. There is no question you stand to earn a higher return on your money by investing elsewhere, if you’re willing to take the risk. The risk is you could lose some or all of your money and there could be no death benefit.

If you’re more interested in a guaranteed return on your money, albeit a fixed and probably lower return than what you could get elsewhere, coupled with a guaranteed return of your money, then this would be a key advantage of taking this path.

If you want to be able to forecast how much your money will be worth at any point in time, with the possibility it could be worth more than the forecast, and under no circumstances less, and know what the guaranteed death benefit is, then this would also be a definite advantage.

Compared to other insurance policies

Life insurance can be divided into two main types: Temporary and permanent. Both types will pay a tax-free death benefit if the policy is in force at the time of death.

Term insurance is temporary because it is designed to be in force for a specified period of time, which is known as the term.

Permanent insurance is called what it is because it is designed to remain in force for the remainder of someone’s life.

The two main types of permanent coverage are universal life and whole life. Both have cash value and living benefits not offered with term.

Indexed universal life is intended that there will be no loss of cash value and it doesn’t guarantee there will be a gain.

Whole life guarantees there will be no loss of cash value and guarantees there will be a gain.

Compare overall cost

Initially term will almost always cost less. However, the money you pay for term is money you will never see again. If you outlive the policy, which is often the case, there will be no death benefit.

Universal usually initially costs less than whole but more than term. There is a lot of flexibility of premium with this type of coverage. If properly planned, the likelihood of a reasonable return and cash value gain is likely. It is also likely that the coverage will be in force for the remainder of your life.

The whole life policy will have the highest initial premium but the premium is guaranteed never to increase. As long as the premiums are paid the policy is guaranteed to never lapse.

Perhaps some of each?

Bob is a retirement planning and safe money professional who specializes in life insurance products and who has more than 20 years experience.

His company, A Bulletproof Life is the 5 F’s: Food, fitness, finances, fulfillment, fun. and is based on his motto: Honesty, respect, best effort

Plan Your Dream or Prepare for a Nightmare.

No one has EVER lost one cent doing business with A Bulletproof Life.

Return Premium Term Life Insurance

hgPeople want to know; what is return premium life insurance? Does term life insurance return premium? Is it the same as ROP life insurance? The short answer is return premium term life insurance is an option. It’s what it says it is. Does that make return premium term insurance one of the best life insurance plans?

Would you rather have something that allows access as it becomes available or would you rather have to wait for a specified period of time, such as 10, 20, or 30 years?

The catch

As they say, the devil is in the details. The return of premium option works only if you keep the policy until the end. For instance, if the term is 30 years and you cancel the policy in 29 years, you will not receive a return of premium.

The way it works is you pay more for the policy, possibly double.

Insurance companies make most of their money from term insurance. They are designed for people to outlive them. Very few ever pay a death benefit.

The normal cost is kept by the company. The extra cost is invested so when the policy term ends, they have made enough on your money to pay you back.

The question I do not have the answer to is how many people actually keep the policy long enough to get their money back as opposed to those who cancel it with the company keeping the extra cost.

A better way

Doesn’t it make more sense to own something that you have more control of? If you are able to hold it for as long as you want, even for the rest of your life, be more in control of how much you put in, when or if you take money out, and if you decide to cancel it, your chances of receiving something in return are much greater?

That option also exists.

Which do you prefer?

The choice is yours:

1. You can either lease or buy.

2. If you simply lease, the money is gone. You’ll never see it again.

3. However, you can pay rent plus extra for a specified period of time with the promise that if you stay for the duration of the lease, you will get all your money back.

4. Another choice is to buy and own. What you pay will probably be close to what you’d pay for the above option but you control it. You can borrow against it. You can sell it.

Term is cheaper right?

Regular term is always cheaper in the beginning. There are many variables people simply do not take into consideration.

When you ask is it cheaper, do you mean in the short run or the long run?

How Does a Whole Life Insurance Policy Work

cxzIt is quite common knowledge that you have a life insurance paying out when the insured person passes away. While there are different kinds of life insurance policies, a whole life insurance policy has stark differences as compared to a term or a universal policy. So, how does it work and what are the big advantages?

A whole life policy does not have a predefined term that is defined during the insurance policy. While it does provide a death benefit and a strong protection over the entire life period of the person that is insured, the policy is deemed valid only as long as the premiums are paid in full. Hence, this kind of policy serves as both an investment package as well as an insurance package. The idea of utilising such a policy comes to good effect when you accumulate a strong cash value towards the policy and this can be used as collateral to borrow or even withdraw during the insurance period.

Quite obviously, there would be a lower return rate as compared to other popular insurance policies. The obvious benefits that comes with this kind of a policy is that there would be a fixed premium and you are aware of the costs that you have to pay. On the flip side though, you are not going to be able to claim flexible premiums as supported by other insurance policies. At the same time, a big advantage offered by a whole life policy is that you have lifetime coverage and you have the option of calling it quits at any time with a surrender fee to be paid. Even though there would be a lower rate of return as opposed to other investments, one good point is that you have tax deferred cash accumulation; which gives you a higher rate.

While there are fixed term insurance policies available today, they do not cover a person for an entire life time and since they are generally long term polices, the risk coverage reduces as the cash value increase over a period of time. Hence, in the event that you pass away, the beneficiary would get a total of the policy amount and the total premium value.

A life insurance policy is definitely a great idea today. It would keep your family secure in drastic events and it could give your family that much needed financial support during a crisis. It would be a strong supplement as it would be expectedly a larger insured value. Make the right choice by choosing the right insurance policy for you and your loved ones. Life insurance is the perfect way to be prepared for the worst.

Why Should You Get a Life Insurance Policy

dAlmost everything in life is uncertain and we should always prepare for any unplanned situation that might pop up. Life is uncertain, and we need to be prepared for the unexpected. In fact, the only things certain in life are taxes and death. One or both of these things are bound to happen at some point in a person’s life. While taxes will always be present in every society, death can come like a thief in the night.

Sickness and death are particularly frightening as it is. Death is certain-a part of life and its certain that one day we will go back to our creator. What’s really frightening though is if we are not prepared when this happens. This is the reason why every person should have a life insurance policy.

A life insurance policy can go a long way toward helping dependents who have experienced the death of a loved one. If the breadwinner of the family dies, his dependents can be left with nowhere to turn. If he has a life insurance policy, however, then his dependents will have a safety net until they can fend for themselves.

Policies can do more than serve as a lifeline for dependents after the insured dies, however. They can also help defray death-related expenses, including funeral costs and the cost of probate for the insured’s will.

Some people are not as lucky as others and they will not be able to leave mansions and lands to their dependents. With this Insurance, a parent can be sure to leave an inheritance to his dependents or beneficiaries. This makes the product especially important for those who have young children-the benefits will help cover their expenses until they are able to work and fend for themselves. The amount of coverage a person should get should be based both on the number of dependents he has and the premiums he can afford on his paying capacity.

There are many things in life that the average household can live without, but life insurance should not be one of those things. The importance of this increases as the number of people in a household increases. A single person with few, if any, close relations can get by with relatively on a very little amount or perhaps no insurance at all. The same is not true for those who cannot be said for persons who have family members or other types of responsibilities.

This unique product is a way to protect your family against possible financial trouble or even ruin, depending on the circumstances. It is also a way to relieve some of the anxiety that family members may feel as they wonder how they will get by should the breadwinner in the family suddenly dies. Some forms of life insurance can even be used as a means of saving money over the long term.

There are various types of policies, and Often one type will be a far better option for a particular family or person than another might be for that same family or person. Because there are so many types of policies available, consumers need to reach out and connect with a trusted agent.

A reputable agent will normally be a state-licensed agent who carries different types of policies from different companies. There are life insurance agents, as well, who normally work for a particular insurance company and sell the products of that company. An Independent Agent can offer many different types of policies at different price points, because he or she carries more options from more sources.

Aside from choosing the correct type of policy, Consumers must also decide on the level of coverage they need. A consumer might say: “I need $10,000 worth of life insurance” but when asked to justify that amount they are at a loss to do so. Is that amount too much; is it too little? Often they simply do not know. The amount of coverage needed will vary from one family to another. It can also vary depending on where in life a person is when he or she takes out the policy. A newly married couple, young in age, will normally need less life insurance coverage than a middle-aged couple with a home mortgage and student loans that need to be paid off. Then again, a high earning young couple may need more life insurance than a middle-aged couple if the high-earning couple needs to replace one of the incomes lost through death. As you can see, coverage is dependent on many issues and aspects, some of which are hard to explore without the aid of a qualified life insurance agent.

Thanks for reading the article. If you are looking for a quote or would like to speak with an agent just click on this link to be pointed in that direction.

Buying Life Insurance 3 Quick Pitfalls to Avoid

ceeIt’s no secret that the majority of Canadians today don’t really understand the life insurance policies they own or the subject matter altogether. Life insurance is such a vital financial tool and important part to your financial planning that it is incumbent upon you to have a basic level of understanding.

Here are 3 quick pitfalls that are important to be aware of.

Incomplete Details In The Application

All life insurance contracts have a two-year contestability clause which means the insurer can contest a submitted claim within two years of the application date if material information was not disclosed during the application process. If you have forgotten to note a relevant fact in your application pertinent to the claim it is possible that your claim could be denied. Fraudulent acts such as lying in the application would not only have a claim denied but possibly also have your policy rescinded entirely. It goes without saying that one should always be truthful when completing a life insurance contract or any insurance contract for that matter. A copy of the original application often makes a part of the policy and generally supersedes the policy itself. Having-said-that, each insured has a 10-day right to review their policy once they receive it. In that time period if you feel the policy is not up to the standard you thought it to be, you can return it to the company and all premiums paid would be refunded

Buying The Right Term Coverage For Your Situation

This process should first start with a question: “What do I need the insurance for?” If your need is to cover a debt or liability then perhaps term is best however, if your need is more long-term such as for final expenses, then permanent or whole life would be a better fit. Once you have established your need you’ll then have to decide what type of coverage you want; term or permanent.

Term contracts are the simplest to understand and the cheapest because there is an “end” to the policy; generally 5, 10, 15, 20 sometimes even up to 35 years. If the policy is renewable an increased premium will be required come the end of the term and this is often a big shock to the client’s bottom line. As an example: a 35 year old male, non-smoker with a 20-year term and 300k benefit may pay anywhere from $300 to $400 per year in premiums. When this policy renews at age 55 his new annual premium could go as high as $3,000 per year! Most people don’t understand this and come term end are devastated, generally unable to continue the policy. It is recommended that your term program have a convertibility clause so that you have the option of converting your term life into a permanent policy. You can exercise this right at any time within the term of the policy without evidence of insurability. Taking a term policy without a convertibility clause should only be done when making your purchase for something of a specified duration. Also, the short side to term life is that it does not accumulate any value within the policy whereas permanent/whole life does.

Permanent/whole life is a very complex from of life insurance because it has both insurance and investment aspects to it. These policies are most beneficial because you have value built up in the policy and you are covered until death however, they are much more expensive than term insurance. An option that you can consider is a permanent policy with a specified term to pay it. Using our previous example, you could have a permanent policy that has a 20-pay term meaning you will make premium payments for the next 20 years and after that you will have your policy until death without ever making another payment towards it. It is very important to understand the variables along with your needs before you make your purchase.

Buying Creditor Life Insurance vs. Personal Life Insurance

One of the biggest misconceptions people have is that their creditor life insurance is true personal life insurance coverage and will protect their family in the event of their death. Far too often consumers purchase these products, generally found with their mortgage and credit cards, by simply putting a checkmark in a box during the application process agreeing to have the plan. It sounds like the responsible thing to do but many families are left in paralyzing situations come claim time. Creditor life insurance, such as mortgage life insurance, is designed to cover the remaining debt you have. Making timely mortgage payments is ultimately declining your remaining balance. Creditor life insurance also declines as your debt declines. Keep in mind that the lender is named as your beneficiary in your policy so consequently, upon death your remaining balance on your mortgage or credit card is paid to the lender, not your family. In a personal life insurance policy you choose the beneficiary and upon death the full benefit amount is paid to the beneficiary of your choice.

Personal life insurance is a great asset to have for a large number of reasons. When you buy life insurance your buying peace of mind but, you must have your situation properly assessed and be sure that you are clear on exactly what it will do for your family.

Just the Facts on Life Insurance

cdsHaving taken out an appropriate cover, a person can attain peace of mind knowing that his family will be taken care of even after his death.

Advantages of Life Insurance

Life insurance has certain other advantages too.

It helps in achieving long term goals. Not only does insurance act as a safeguard for an individual’s future life but also protects the assets of a family.

It is a kind of savings that can be used in dire circumstances.

Before deciding to buy a life insurance policy, it is generally recommended that one obtains quotes from various life insurance companies. This will give us an idea as to which insurance policy meets our needs in the best possible way.

One can also compare insurance policies and get quotes and select the one that is affordable and suits individual needs.

Online Insurance and its merit

These days, life insurance policies are also available online. It has become very easy to compare quotes using the online medium. Premiums as well as various other features can be compared easily and as a result, it becomes easier to choose the best insurance policy. There is no dearth of web aggregators that make looking for a suitable policy easier and simpler. Prospective insurance buyers just need to share their requirements with the web portal and get most affordable quotes.

Making A Decision

While deciding on a particular policy, there are certain factors that need to be considered before making a decision. The first and foremost question is the amount of cover that is needed and the time period for which it is needed. To answer this question, several other factors come into picture. These are age, occupation, sex, health, medical history, etc.

Why do we need an Insurance Policy?

Every person dreams that even after him, his family maintains the kind of lifestyle they are enjoying today. For this, he needs to decide the insurance cover needed and also the duration of the same. To work out this figure, he can take help from professionals who will calculate and communicate the answers to these questions.

Most people are generally unaware about life insurance. It is advisable to study about these before making a decision. One must know that there are different types of life insurance that differ on the basis of the features included within them. It can be level term assurance, increasing or decreasing term assurance, renewable term assurance, family income benefit assurance, etc. After studying them, one can select the best quote and make the life of one’s loved ones safe and secure!

Twelve Secrets and Tricks to Buying Life Insurance

vbSecret #1: Don’t spend too much time on a life insurance quote.

Do not be fooled by the low price quotes you get online – they don’t apply to you unless you are extremely healthy. Statistically only 10% of people who apply actually get the lowest priced policy. The premium you end up paying has nothing to do with the initial quote you get online or from an agent. It is amazing to me how often I see people getting duped by an agent who quotes company X at a lower price than another agent.

Life insurance policies are the same price no matter who you buy from! One agent or website quoting a lower premium means nothing. Prices for any given policy is based on your age and health. There are a few exceptions to this but that is beyond the breadth of this article.

Most life insurance companies have 10-20 different health/price ratings and no agent or website can assure you the quote they give you is accurate. You have to apply, do a health check, and then go through underwriting (meaning you complete a mini-exam with a nurse in your home and then the company checks you doctor records and reviews and ‘rates’ your health) to get the real price of the policy. Remember that a health rating also factors in your family history, driving record, and the type of occupation you have. Only use quotes to help narrow down your choices to the top companies. You may want to consider a no load or low policy. The more that you save on commissions the more money builds up in your policy. You can even buy term insurance no load, and save a lot on premiums. You will not get the help of an agent, which may be worth something if they are very good.

The most important factor determining price is matching your particular health history with the company best suited for that niche. For instance company X might be best for smokers, company Y for cancer survivors, Company Z for people with high blood pressure, etc.

Secret #2: Ignore the hype on term versus cash value permanent insurance.

You can go crazy reading what everyone has to say on buying term insurance versus a whole or universal life policy. Big name websites give advice that I think borders on fraudulent. Simply put there is NO simple answer on whether you should buy permanent cash value policies or term insurance.

But I do think there is a simple rule of thumb – buy term for your temporary insurance needs and cash value insurance for your permanent needs. I have read in various journals and run mathematical equations myself which basically show that if you have a need for insurance beyond 20 years that you should consider some amount of permanent insurance. This is due to the tax advantage of the growth of the cash value within in a permanent policy. I am divorced and have taken care of my children should I die. I probably no longer need as much insurance as I now have. I have earned a great return on my policies and have paid no taxes. I no longer pay the premiums, because there is so much cash in the policies. I let the policies pay themselves. I would not call most life insurance a good investment. Because I bought my policies correctly, and paid almost no sales commissions my policies are probably my best investments. I no longer own them, so when I die my beneficiaries will get the money both tax free, and estate tax free.

Since most people have short term needs like a mortgage or kids at home they should get some term. Additionally most people want some life insurance in place for their whole life to pay for burial, help with unpaid medical bills and estate taxes and so a permanent policy should be purchased along with the term policy.

Secret #3: Consider applying with two companies at once.

Life insurance companies really don’t like this “trick” because it gives them competition and increases their underwriting costs.

Secret #4: Avoid captive life insurance agents.

Look for a life insurance agent who represents at least fifty life insurance companies and ask them for a multi company quote showing the best prices side by side. Some people try to cut the agent out and just apply online. Just remember that you don’t save any money that way because the commissions normally earned by the agent are just kept by the insurance company or the website insurance company without having your premium lowered.

Plus a good agent can help you maneuver through some of the complexities of filling out the application, setting up your beneficiaries, avoiding mistakes on selecting who should be the owner, the best way to pay your premium, and also will be there to deliver the check and assist your loved ones if the life insurance is ever used.

Secret #5: Consider refinancing old life policies.

Most companies won’t tell you but the price you pay on your old policies has probably come down dramatically if you are in good health. In the last few years life insurance companies have updated their predictions on how long people will live. Since we are living longer they are reducing their rates rather dramatically. Beware the agent may be doing this to obtain a new commission, so make sure it really makes sense.

I really am amazed at how often we find that our client’s old policies are twice as expensive as a new one. If you need new life insurance consider “refinancing” your old policies and using the savings on the old policies to pay for the new policy – that way there is no extra out-of-pocket costs. We like to think of this process as “refinancing your life insurance” – just like you refinance your mortgage.

Secret #6: Realize life insurance companies have target niches that constantly change.

One day company ‘X’ is giving good rates to people who are a little overweight and the next month they are super strict. Company ‘Y’ might be lenient on people with diabetes because they don’t have many diabetics on the books – meaning they will give good rates to diabetics. At the same time company ‘W’ might be very strict on diabetics because they are insuring lots of diabetics and are afraid they have too big of a risk in that area – meaning they will give a bad rate to new diabetics who apply.

Unfortunately when you are applying a life insurance company will not tell you, “Hey, we just raised our rates in diabetics.” They will just happily take your money if you were not smart enough to shop around. This is the number one area a smart agent can come in handy. Since a good multi-company agent is constantly applying with multiple companies he or she will have a good handle on who is currently the most lenient on underwriting for you particular situation. The problem is that this is hard work and many agents are either too busy or not set up to efficiently shop around directly to different underwriters and see who would make you the best offer. This is a lot harder than just running you a quote online.

Secret #7: Don’t forget customer service.

Most people shopping for insurance focus on companies with the lowest price and the best financial rating. Unfortunately I know of some A+ rated companies with low rates who I would not touch with a ten foot pole simply because it’s easier to give birth to a porcupine backwards then it is to get customer service from them.

Before I understood this I used a life insurance company that gave a client a great rate but 2 years later the client called me and said, “I have mailed in all my payments on time but just got a notice saying my policy lapsed.” It turned out the company had been making lots of back office mistakes and had lost the premium payment!

We were able to fix it because we caught the problem so early. But if the client happened to have died during the short period the policy had lapsed, his family might have had a hard time proving that the premium had been paid on time and they might not have received the life insurance money – a loss of hundreds of thousands of dollars in that case.

Secret #8: Apply 3-6 months ahead of the time you need the insurance if possible.

Don’t be in a hurry to get a policy if you already have some coverage in force. But go ahead and apply right away knowing that you might need months to shop around if the first company does not give you a good rate. Even though the life insurance industry is getting more automated your application will still often be held up for weeks or months while the insurance company waits on your doctor’s office to mail them a copy of you medical records.

If you are in a hurry and buy a quickie ‘no-underwriting’ policy without going through the full health checks and underwriting that a mainstream life insurance company requires, you will end up paying 20%-50% more because the insurance company will automatically charge you higher rates because they don’t know whether you are healthy or about to die the next day.

Secret #9: Avoid buying extra life insurance through work if you are healthy.

I am sure there are exceptions to this “trick” but I have rarely found one. By all means keep the free life insurance your employer provides. But if you are healthy and you are paying for supplemental life insurance through payroll deduction you are almost certainly paying too much. What is happening is that your ‘overpayments’ ends up subsidizing the unhealthy people in your company who are buying life insurance through payroll deduction.

Usually the life insurance company has cut a deal with your employer and will waive the required health exam for all employees – instead they just average the price for all the employees and offer one or two rates for males or females at any given age. Life insurance companies know they will pick up lots of unhealthy clients this way so they jack up the price on everyone so that the healthy people end up overpaying so that the unhealthy employees get a cheaper policy. Also, unlike the guaranteed term policies which we recommend, most life insurance you buy through work will get more expensive as you get older.

Also group life insurance is generally not portable when you retire or change jobs meaning that when you retire or change jobs you might have to apply all over again even though you will be older and probably not as healthy and risk being turned down for a policy. If the group plan does allow portability they generally limit your conversion choices and force you to go into expensive cash value plans.

I remember helping someone evaluate his supplemental life insurance. He was sure it was a better deal than any policy I could find him. Little did he know that the price of his group plan would go up every year? By the time he retired his premium would have risen to over $10,000/year. I found him a policy for around $1000/year that would never go up. Also, unlike his old group life policy, he could take the individual policy with him when he changed jobs or retired.

Secret #10: Do a trial application on a COD payment basis.

Only send money with the application if you need the life insurance coverage right away. Sending a check with the application is a traditional practice agents used to do – I think mostly because it got them their commissions faster. If you send money with an application you usually get temporary coverage immediately but if you already have plenty of coverage and are just trying to get better rates ask your agent to do a trial application on a COD basis so you only pay once the policy is approved. If you do not send money, and you die before paying for the policy there is no coverage.

Secret #11: Wear your shoes when the nurse measures your height.

When the insurance company sends out the nurse to do your health check try to be as tall as possible if you are overweight? In most states you are allowed to wear shoes and if you are a little overweight your taller height/weight ratio will look a little better to the underwriter who is determining your health rating and policy price. Also do your exam early in the morning with no food in you – this will make your cholesterol count and various health ratios look the best.

Secret #12: Be careful with extra perks and riders.

Most policies come with options like accidental death benefit, child riders, disability riders, return of premium etc. If you do the math on most of these “extras” they usually don’t make smart financial sense. Life insurance companies are out to make money and these riders are usually profitable because they either cover something that rarely happens or they are so stringent that the benefit never gets paid out. Keep things simple and focus mainly on getting a life policy to cover your life without many strings attached. Again a good agent can help you weigh the benefits of the extra riders. But be wary of an agent who tries to tack on every possible extra rider.

What is an Annuity

crAnnuity Definition and How They Work

Life annuities are confusing for most people. There are many different types and all are basically the same thing: a product where an insurer makes payments to the insured for the term of their life. The seller is also known as the issuer. These payments to the buyer (also known as the annuitant) are for the immediate payment of a single payment annuity (lump sum cash) or regular payment annuities which come in a series of regular payments to the issuer.

A good example of life annuities is when a person receives a large settlement from a lawsuit. A company may buy the lump sum and then make payments to the recipient of the settlement for the term of their life.

Most life annuities have an indefinite period as there is no way of knowing how long someone may or may not live.

To annuitize means that the contract owner (annuitant) is ready to begin removing or receiving funds from the annuity. The more premiums that have been paid into the annuity, the longer the payments will continue.

Most people choose to pay into an annuity over time before annuitizing in order to receive lifetime payments.

Some contracts may have stipulations for a beneficiary to receive funds if the contract owner dies before the annuity is empty of funds.

Not every annuitant is the contract owner. A consumer may choose to purchase an annuity and designate a family member, such as a spouse or child, as the annuitant. This person will receive the funds in the annuity for their lifetime or until the annuity runs out of funds.

Different Types of Annuities

There are many different types of life annuities on the market today.

• The single payment annuity is when the insurer buys a lump sum.

• A regular payment annuity is when a company buys a settlement in exchange for regular payments, usually a promise from the company or person that must repay a lawsuit (regular payment annuity).

• Fixed annuities make payments in a set amount or that will increase over time by a certain pre-determined percentage.

• Guaranteed annuities are also called pure life annuities. These annuities are issued to a recipient that may die before their original payment is recovered, but the payments will continue to a beneficiary.

• A joint annuity is similar, as the payments are structured so that the payments will continue to the surviving spouse, though payments will stop if the surviving spouse passes away.

• Impaired life annuities are offered to people that have a severe illness that will cut short their life expectancy. These are only slightly different from other annuity types and a medical underwriter must be involved in creating this annuity.

Who Benefits The Most From Annuities

Life annuities work well for anyone that may have reason to believe that they will need income for retirement beyond savings or to help families during times of economic uncertainty. Someone who has been injured can benefit from annuities. Another situation would be for someone who finds they are suffering from a chronic or terminal illness. An annuity would allow them to leave work and concentrate on treatments, while still paying bills.

Annuities offer excellent interest rates when compared to savings accounts. The cumulative action of interest on an annuity will create a lifetime of income for anyone that is able to invest in an annuity. One of the most well known annuities is a 401K – which is offered by many employers. If considering a 401K, then annuities can fit anyone that is working.

Premium Information

An annuity premium can be best explained as the money paid into the annuity. These premiums are deposits into the annuity itself, much like bank deposits. Each payment made as a premium is a payment into the annuity; these payments will be withdrawn by the annuitant eventually.

Unlike many insurance contracts, all premium payments made into an annuity can be considered payments by the ‘current’ self to the ‘future’ self. For example: today someone purchases an annuity for $20,000; in ten years, the same person can withdrawn money from that same $20,000. Premiums are loans to a future self.

Pros and Cons

There are features of annuities that can be beneficial to the consumer. For instance, a tax-deferred growth on the annuity and, often, a compounding clause. Most annuities have guaranteed rates of return on every dollar invested into the annuity. Choosing to annuitize can also result in lifetime payments.

Different annuity companies have various other benefits that may be beneficial to the collecting party. Each addition to the contract will have specific functions and should be examined carefully.

There are also cons, such as the fact that every guarantee must be funded in some way. When a guarantee is not needed by a consumer, the collector should not purchase them. Cash can be held for some time if the contract purchased has a surrender period. Consumers should avoid a contract with a surrender period unless they have another means of income such as stocks, mutual funds, or savings.

Why Is My Life Insurance Policy Lapsing

cedEvery month Billions of dollars in life insurance death benefits lapse due to declining interest rates on interest sensitive life insurance products. The product I am talking about goes by a few different names: 1. Universal Life 2. Flexible Premium Life 3. Adjustable Premium Life.

One would think, that as long as I pay the premium, the policy will stay in-force. Unfortunately, that is not how it works for these type of policies. The premium due, is calculated and based on the credited interest rate. If the interest rate credited to your policy is lower than the interest rate illustrated when you bought the policy, the premium should be increased.

Universal Life is a combination of traditional whole life and term life. Best of both worlds. You have the ability for the policy to build cash value and not have to pay the high premium costs of whole life.

Universal Life is different from Traditional Whole Life. Instead of crediting a dividend to the policy, universal life credits an interest rate to the policy. If interest rates were at 8% when you bought your life insurance policy and rates are at 4% today, you would have to pay a much higher premium to make up for the lost interest gain on you cash value, otherwise your cash value will dwindle and one day cause your life insurance policy to lapse.

The best way to find out if your policy is going to lapse unexpectedly, is to order an in-force illustration from your insurer.

OK, so you order an in-force illustration, now what? First thing you should do is contact the agent that sold you the policy in first place, and ask them to explain it. I would also ask this agent why they didn’t do an annual review with you to keep your policy in good standing. Secondly, you should seek out an unbiased “Third-Party” to review the report with you.

When requesting an in-force illustration, it is best to always ask for two illustrations. The first would be using your current premium and current cost of insurance and current interest rates. The second illustration would be to ask the insurance company to solve for premium extending coverage to age 100.

With these two in-force illustrations, we can determine if it is in your best financial interest to keep your current policy, or dump it and buy a new policy.