Build your financial foundation with life insurance.

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For several years now, September has been designated as Life Insurance Awareness Month. When we change our clocks back in the fall, we also check the batteries in our smoke detectors to protect our families. What a perfect reminder to review our life insurance needs annually to help ensure our loved ones are protected.

There are many life changes that can take place in a year – marriage, children, job changes, etc. Each of these changes can make a big difference in the life insurance coverage needed for your family.

“I know I need it, but I don’t want to think about it now.” “I’ll deal with it later, it’s not a priority.” These are two of the most common responses when the topic of life insurance comes up. Despite being saddled with a reputation as a boring financial product, life insurance still remains a product that many financial professionals agree should be the foundation on which people should build their financial goals.

Why so? First, think about your loved ones. The primary benefit of life insurance is to provide for them, helping them meet daily expenses and continue the activities of daily life without any further major disruption. Familes can use life insurance proceeds to pay bills – like credit card and mortgage bills – and daily necessities such as groceries, gas, etc. Without adequate life insurance coverage, many families could be placed under great financial distress to meet the ongoing financial obligations of their new lives.

Life insurance can also protect one’s spouse against sharp reductions in future pension and Social Security payments by replacing assets cut short by premature death. For example, it is not unusual for a surviving spouse to receive less than half of his or her spouse’s projected pension because death has interrupted anticipated contributions flowing into the plan.

And it’s not just at home where life insurance can help. Life insurance can help business owners and others with significant assets to pass those assets to their loved ones in a tax-efficient manner. It also serves as a tremendous tool enabling people to support nonprofit organizations through charitable gifts.

Life insurance might not be a popular topic, but the security it offers brings a level of comfort that most people can’t do without. In addition, most people will find that life insurance coverage is a key component as they plan for their long-term financial goals. None of us can control whether we will have tomorrow, but protecting the people in our lives is something we can take control of today.

70 thoughts on “Build your financial foundation with life insurance.”

  1. For several years now, September has been designated as Life Insurance Awareness Month. When we change our clocks back in the fall, we also check the batteries in our smoke detectors to protect our families. What a perfect reminder to review our life insurance needs annually to help ensure our loved ones are protected.

    There are many life changes that can take place in a year – marriage, children, job changes, etc. Each of these changes can make a big difference in the life insurance coverage needed for your family.

    “I know I need it, but I don’t want to think about it now.” “I’ll deal with it later, it’s not a priority.” These are two of the most common responses when the topic of life insurance comes up. Despite being saddled with a reputation as a boring financial product, life insurance still remains a product that many financial professionals agree should be the foundation on which people should build their financial goals.

    Why so? First, think about your loved ones. The primary benefit of life insurance is to provide for them, helping them meet daily expenses and continue the activities of daily life without any further major disruption. Familes can use life insurance proceeds to pay bills – like credit card and mortgage bills – and daily necessities such as groceries, gas, etc. Without adequate life insurance coverage, many families could be placed under great financial distress to meet the ongoing financial obligations of their new lives.

    Life insurance can also protect one’s spouse against sharp reductions in future pension and Social Security payments by replacing assets cut short by premature death. For example, it is not unusual for a surviving spouse to receive less than half of his or her spouse’s projected pension because death has interrupted anticipated contributions flowing into the plan.

    And it’s not just at home where life insurance can help. Life insurance can help business owners and others with significant assets to pass those assets to their loved ones in a tax-efficient manner. It also serves as a tremendous tool enabling people to support nonprofit organizations through charitable gifts.

    Life insurance might not be a popular topic, but the security it offers brings a level of comfort that most people can’t do without. In addition, most people will find that life insurance coverage is a key component as they plan for their long-term financial goals. None of us can control whether we will have tomorrow, but protecting the people in our lives is something we can take control of today.

  2. Do I Need Life Insurance?
    I’ve heard you talk about the importance of having life insurance. I know I need to be insured, but how much life insurance should I have? My employer offers a small life insurance policy as part of my benefits package. Does that suffice?

    Everyone over the age of 18 should be insured. Term life insurance is so inexpensive, there’s no excuse for not being covered. We recommend that you take out a 20 year, level term policy worth 10 times your annual income. If you make $40,000 per year, you should have a 20-year term policy worth $400,000. In the event of your death, your surviving spouse can invest that money. If your spouse invests that $400,000 and gets a 10% return, they will have been able to completely replace your income. If you’re married, your spouse should take a similar policy.

    It’s great that you have some life insurance through your employer. However, these policies are generally a percentage of your annual income. For example, if you make $40,000 per year and your employer provides a 60% life insurance policy, your surviving loved ones would only receive $24,000. Not to mention, the minute you leave your job for any reason, that life insurance will be terminated. Again, 20-year term life insurance is so inexpensive, there’s no excuse not to be covered.

  3. You must progress. But when it comes to money, progression is often mistaken for blind accumulation. Accumulation of things, money, and experiences are often the aim. While I choose not to argue today for the value of accumulating money, accumulation can’t be your financial guide. It can’t be as simple as “you are progressing if you are accumulating money, and you’re not progressing if you aren’t accumulating money.” There’s much more to it. There are stages, four stages.

    Your aim is to complete the tasks and markers within one classification, and then move on to the next. This will allow you to focus on the right things. This will allow you to progress consistently. And not to get all dramatic up in here, but progressing through these four stages will change your financial life.

  4. It’s time for that annual rite of passage into the New Year: making your resolutions. In addition to vowing to lose 10 pounds or organize your photo drawer, perhaps 2012 should be the year to focus on your finances. Regardless of your age or financial status, the following ideas might help make 2012 more financially beneficial.

    Twenty-Somethings.

    If you are fortunate enough to have school behind you and have landed a job in this challenging job market, congratulations! Now it’s time start preparing for your financial future.

    Once you have a plan to repay your student loans, perhaps the most important step you can take in 2012 is to start creating a cash reserve for emergencies. Some experts recommend stashing away three to six months worth of living expenses to keep you afloat in the event of a job loss, accident or any other unforeseen situation that might affect your financial security.

    Keep your cash reserves in liquid investments that will be readily available in case you need them. Consult a financial advisor who can assist you in finding investments that will hold your cash reserves and are accessible in the current low interest rate environment.

    Thirty-Somethings.

    With all the current demands for your time and money, it’s hard to think about saving for retirement. An employer-sponsored plan like a 401(k) or a 403(b) is an easy way to invest for the future. If you haven’t started doing so already, resolve to make 2012 the year you start maximizing contributions to your company’s retirement savings plan.

    If you can’t contribute the maximum right away, contribute at least enough to qualify for any employer matching contribution. It’s essentially free money that can help you take full advantage of the savings plan.

    To get started, talk to your Human Resources representative or visit the plan provider’s website. You’ll want to find out how much you are contributing and whether an employer match is currently available. Keep in mind that the 401(k) contribution limit is $17,000 in 2012 – up from $16,500 in 2011.1

    Forty-Somethings.

    Now that you have more at stake financially, make 2012 the year to review your life and disability insurance coverage to ensure that it reflects your current situation and your future goals. Start by asking yourself these questions:

    How might unexpected events impact my family’s goals?
    How will I provide for dependents if I’m unable to earn income or if I am gone?

    If you are overwhelmed by the prospect of making insurance decisions, a financial advisor can help you take a big picture look at your finances and see what types and amounts of insurance make sense for you.

    Fifty-Somethings.

    Are you feeling behind on your retirement savings? Resolving to take advantage of retirement plan catch-up contributions in 2012 can help make you feel more on track. People age 50 and older can make special contributions to their qualified and non-qualified plans over and above the regular contribution limits.

    In addition to the 401(k) contribution limit of $17,000, age 50 plus workers can contribute an extra $5,500 to their qualified plan in 2012. Plus you can make an additional $1,000 contribution to your IRA on top of the normal $5,000 limit. With retirement just around the corner, you can make this the year to kick your savings into high gear.

    Sixty Plus-Somethings.

    If you are retired and enjoying the fruits of your financial planning, it’s time to start thinking about your legacy and estate plan. If you’ve procrastinated doing so, 2012 can be the year to give yourself peace of mind knowing that you’ve secured your family’s future, and are ready to help the causes close to your heart.

    Designing a legacy consistent with your values is a personal and complex process, but well worth the effort. Before the year gets away from you, set up a family estate planning meeting to open communication, prevent conflicts and let your family know what’s important to you. Then seek professional advice from an attorney, tax professional or financial advisor to make sure your estate plan is in order.

    Before you close the book on 2011, take a look back at what you’ve accomplished with your money and think about what you’d like to change for next year. Your financial picture is ever evolving – and it’s never too late to make changes to help ensure many happy new years to come

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  17. To minimize the loss you should own the proper insurance including life, disability, health, and property and liability insurance. Life and disability insurance provides benefits to replace lost income due to death or disability. The general rule of thumb for life insurance is to have eight to ten times your income if you’re the primary breadwinner. You may need more life insurance depending upon your circumstance such as if you’re married and your spouse depends on your income, you have children, own a house, and/or are retiring and are losing insurance from an employer. Health insurance provides benefits for proper medical care.

  18. Because life insurance needs change over time, your life insurance amount should be reevaluated periodically. Insurance experts recommend revisiting the coverage of your policy once every five years or whenever you experience a major life event such as a change in income or assets, marriage, divorce, the birth or adoption of a child, or a major purchase such as a house or business.In theory, you should have a declining need for life insurance as you age because fewer people remain dependent upon you for income support. Exceptions would be protecting a business entity or paying taxes on a large estate for heirs. If the purpose of buying life insurance is to pay estate taxes, then you’ll need permanent life insurance, which is in-force as long as you live and pay the premiums.

  19. Buying term life insurance makes little or no sense whatsoever—the financial equivalent of imagining that any car or boat represents “an investment.” You do, however, have to establish some sort of death benefit for your family so that your passing will not create as much financial as emotional despair. Arguably the most secure of all possible investments, a life insurance policy that builds cash value provides for and protects your family against the worst of all possible disasters. Experts suggest that you should insure your life for the market value of your home plus five years’ salary.

  20. Policies with an investment component cost many times more than term policies. As a result, many people who buy whole life often can’t afford an adequate face value, leaving themselves under insured.The returns quoted by the agent are simply guesses – not reality. And some companies keep these guesses of future returns on the high side to attract more buyers.

  21. The economic downturn undoubtedly shifted Americans’ focus away from life insurance to competing priorities for household money, such as putting food on the table. Still, half of U.S. households concede they need more life insurance, the highest level ever found in a LIMRA survey, which is released every six years.Nearly seven in 10 American households with children under 18, those that typically need life insurance most, said they would be in jeopardy if the primary breadwinner died.Besides being cash-strapped, another reason people don’t buy life insurance is because they don’t know much about it, according to the survey.”People are confused about their choices, and from behavioral economics we know that if someone is not certain that they’re doing exactly the right thing, they will tend to do nothing,” said Robert Kerzner, CEO of LIMRA. “They have no idea how much it costs, but they have this perception that it’s expensive and it can’t fit in their budget.”To shed some light, here are some straightforward questions and answers about life insurance, focusing on term insurance.

  22. The first step in establishing your financial security is to confront the biggest threats to it. That requires asking yourself some tough questions: What would happen if you or your spouse became sick or injured – or died? What if you lost your job? What if your home was seriously damaged in a storm or by fire? What if you were in a serious auto accident? All of these situations are potentially devastating to your family’s financial health. That’s where insurance comes in.Life insurance can provide your family members the resources to maintain their lifestyle when you die. It can replace some or all of your income. It also can pay off debts and cover funeral costs. It can even help fund longer-range needs like college tuition or retirement. Don’t forget to insure your spouse as well, even if he or she doesn’t work outside the home. A stay-at-home parent provides vital household services that would be expensive to replace, like childcare, transportation and household chores.

  23. 1. Find Ways to Earn More

    One of the keys to strong finances is earning more than you spend. You should rein in your spending, true, but you should also look for ways to boost your income. This doesn’t mean that you take a second job and never see your family. It means that you look for ways to build alternative income streams. Web sites, a side business, or royalties can be good ways to earn alternative income.
    2. Avoid Debt when Possible

    When you have debt, you are paying someone else interest. This is money that goes straight toward enriching someone else, rather than yourself. Avoid debt where you can, being picky about what you will go into debt for, as well as borrowing as little as possible. You don’t need to borrow $15,000 for a car when the $8,000 car is perfectly adequate. Save up for a down payment when you can.

    If you already have debt, pay it down as quickly as possible. Make a plan to get rid of your debt — especially credit card debt which is expensive and can be devastating.
    3. Invest in the Future

    Be prepared for the future by saving up. Have an emergency fund, and save for retirement. Adjust your budget (or spending plan) so that saving is an important and prominent part. Proper preparation for the future can help you avoid running out of money during retirement, or being financially devastated by unforeseen money problems, including expenses and unemployment.

    Properly diversified investments can help you achieve your long-term goals (especially for retirement). Consider your asset allocation, and consider prudent investments to help you get ahead.
    4. Invest in Yourself

    There are a number of ways that self-improvement can help you build a stronger financial foundation. Develop skills that can make you more marketable. This can help you increase your earning power. Additionally, you can take the time to educate yourself about money and how it works so that you make better decisions that can help you more efficiently put your money to work for you.

    Don’t forget to take the time to enjoy yourself and develop affordable hobbies. You will enjoy better productivity, and possibly better health (saving money), if you take the time to eat well, get sufficient sleep, and develop talents and hobbies that can help you reduce stress and relax. This also includes developing healthy relationships with loved ones.
    5. Charitable Giving

    It may seem strange to consider that giving money away is part of a strong financial foundation, but it is. Many financial experts recommend that you give some money to charity, or to a church, or to some other good cause that you believe in. Charitable giving can also be a good way to strengthen your community and the economy, which benefits everyone.

  24. Texas Life Insurance I was suggested this web site by my cousin. Life in the 21st century offers challenges and opportunities. Today, there are many financial strategies that can help you reach your short- and long-term goals. As you review your financial situation, track your progress, and modify your strategies, your financial professional can be a valuable resource.

    Most everyone has a financial strategy that should be regularly reviewed. Even if you don’t have a formal, written plan, you probably adhere to some type of budget, save for special goals, or look over your retirement savings from time to time. When paying bills and reconciling your accounts, you frequently look at various parts of your finances. However, once each year, be sure to gather all your financial records and take a close look at your entire financial picture. Here’s a brief description of an annual financial review:

    1) Analyze your cash flow. Does your income equal or exceed your fixed and variable expenses? The amount of income that exceeds what you spend is called positive cash flow. If your expenses exceed your income, you have negative cash flow. If your cash flow is negative, it may be time to reorganize your budget and minimize any unnecessary expenses so that you can focus on saving for your future.

    2) Plan and prioritize your goals. For each of your financial goals, consider the projected cost, the amount of time available to meet your goal (time horizon), and your funding method (a scheduled savings plan, liquidating assets, or taking a loan). Once you’ve identified your goals, plan according to your priorities. Most importantly, establish an emergency fund of at least three months of income to handle life’s unexpected turns. Then, develop a savings plan for larger, long-term goals, such as your child’s wedding or educational expenses. Finally, prioritize more flexible goals, such as purchasing a new car, renovating your home, and planning a vacation.

    3) Review your retirement needs. Will you have enough money when you retire? Pensions and Social Security may not provide the income needed to maintain your current lifestyle. Consequently, review your retirement needs and start a disciplined savings program for your retirement.

    4) Minimize income taxes. You may be able to reduce your tax liability by taking advantage of tax breaks, such as contributing pre-tax dollars to an employer-sponsored retirement plan. Be sure to claim any deductions available for mortgage interest, traditional IRA contributions, or charitable donations. Talk to your tax advisor about strategies that are appropriate for your unique situation.

    5) Beat inflation. Besides creating higher costs for goods and services, inflation depreciates currency values. In other words, as prices increase, the purchasing power of your income—dollar for dollar—decreases. If, for example, the current inflation rate is 4%, you would need a 4% annual wage increase to maintain your buying power. A decline in your buying power could lower your standard of living and affect your lifestyle. Therefore, it’s important to consider inflation as you save, invest, and make purchasing decisions.

    6) Manage unexpected risks. Life involves risk, which may lead to financial loss. For example, you could sustain a disability and be unable to earn an income, or an unexpected death could cause financial hardship for your family. Consider making insurance, including disability income insurance and life insurance, the cornerstone of your overall financial strategy.

    As you review your financial situation each year, you may need to modify your plan according to changing goals and circumstances. If you faithfully track your progress in these six areas, you may be in a better position to maintain your lifestyle now and in the future.

  25. Are you financially fit enough to protect your love ones in the event of an emergency or incapacitation? If you are like most Americans you are likely woefully under insured when it comes to protection from a death, disability or even a natural disaster than destroys your home.
    Here’s a quick quiz to assess your ability to manage these risks:
    1. Do you have health insurance; and if so, can you cover your maximum out of pocket costs?

    Having a reserve to cover these costs will enable you to consider a lower cost high deductible policy and prevent you from reading your 401K or taking loans in the event of a medical emergency.

    2. Do you have emergency cash reserves of at least 6 months of expenses?

    This is especially important in today’s economy. Families who did not have this buffer are really struggling due to a job loss. If you have a higher income position, you will need to consider an even larger reserve or cushion of at least 1 years living expenses.

    3. If you have dependents do you have life insurance of roughly 7-10 times income?

    This is a general rule of thumb and this will decline as your assets increase with age. Procuring low cost term insurance to cover your living expenses, including your mortgage and possibly college funding as well as retirement funding during your anticipated employment, is wise.

    4. Do you have disability insurance that provides roughly 2/3 of your income after taxes?

    Group policies are taxes while individual policies are not, so look at your after tax payment and see if you think it will cover you. Likely you will need a supplemental individual policy to provide adequate protection. Note that group policies can be extremely expensive after age 50; so, if you are healthy, locking in a lower premium for individual coverage at that point may be wise.

    5. If you are a renter, do you have renters insurance?

    This will protect your contents in case of a fire, theft or other disaster.
    If you own a home, does your insurance cover the full replacement cost (current) of your home? Make sure the coverage is increased to correspond with current building costs. Often if your insurance coverage is less than 80% of the replacement cost you will not be reimbursed for full replacement cost of the dwelling.

    6. If you are in a flood plain or fault line, have you acquired supplemental coverage for these events?

    Consider a wind and hail policy, flood policy on coastal property or flood prone areas. Shop around for earthquake coverage if you are concerned about this risk.

    7. Are you deductibles as high as you can afford? $1000+ for homeowners, $500+ auto?

    Increasing your deductibles can substantially decrease your premiums. Ask your agent to run the numbers to quantify savings.

    8. Do you have an umbrella liability policy that covers your net worth?

    This is an often overlooked aspect of your insurance coverage yet it is very inexpensive and provides peace of mind in a litigious society.

    9. If you are in your 50s+ have you looked into a long term care policy?

    Baby Boomers are aging and with that will come an epidemic in long term care due to age related decline in physical and mental capacity. You need to have a plan in place to protect yourself and your assets. Medicaid is not a viable option as you must spend down almost all of your assets and have a limited income.

    February may be an excellent time to review your insurance policies to better understand your coverage. Contact your agent for any questions and or to run quotes from other carriers to see if you can save money for the same or better coverage.

  26. Hi,

    Since having my MI 6 months ago and a stent fitted, I am now wondering what I should do about life insurance policies that were taken out many years ago before the MI event.

    1. Does anybody know if after suffering such an event whether or not I need to notify them that it happened so as to ensure it will not be void should one ever need to use it ?

    2. Also when I had my M.I event I signed up to be part of a further study of heart health which involved undergoing 2 additional Angiogram procedures,1 was the emergency procedure, 1 took place 2 days after my emergency procedure and the 3rd one is due to take place next week. However I am a little worried whether or not to go ahead with this voluntary procedure for two reasons.

    a) being the 1/1000 risk of fatality, and 1/500 risk of stroke, kidney damage etc and the other risk factors associated but thats for me to decide. However question b needs to be resolved before i can decide….

    b) Would insurance companies for life insurance etc see the voluntary angiogram as an unneccessary risk and therefore void the policies if a fatality occured ? Thus leaving partner with a mortgage etc in full and nothing gets paid out due to the procedure being deemed as “not required” / “Voluntary” ???

    I would very much appreciate some experience on this if there are any out there….

    Thanks

  27. What if today was your last day? Would your loved ones know what to do? Having life insurance is important not just for yourself but for your family as well. Learn about life insurance and how you can protect yourself and your family. Determine how much insurance is right for you and your family, what type of life insurance best meets your needs, and start saving now.

  28. I came across a unique life insurance program that is specifically tailored for children and young adults. Its called Globe Life Insurance and it seems to have a lot of great benefits. It begs the question if you really need a life insurance policy for your child, but this will be an individual decision you make with your family and financial advisor.

    Basically, Globe Insurance is a whole life insurance policy that provides up to $30,000 in life insurance coverage for younger people. Its a pretty easy way to establish their financial foundation while they are young. It seems pretty affordable, but premiums may vary. Their website has more information on pricing.

    You can buy directly online at their website with just a few health questions. Theres no need to talk to anyone. Once your application is approved your full protection starts on the first day the policy is issued. The beneficiary you choose would receive benefits free of federal tax income and theres a 30-day money-back guarantee that is always nice to see.

    As with all whole life insurance policies, Globe Life offers cash value which builds over time. This can be used in the future to help with the familys financial needs. It can even be used towards college expenses, which we all know can be outrageously expensive. If you are in the market for life insurance for your child, its worth looking into.

  29. One of the key decisions you must make when you retire is what to do about your life insurance coverage.

    Federal employees are automatically enrolled in the basic version of the Federal Employee’s Group Life Insurance plan when they are first hired and can add optional insurance to supplement it. There’s no underwriting (medical exam or questions) for new hires or for employees who wish to increase their coverage when they experience certain life events: marriage, divorce, birth or adoption of a child, or death of a spouse. There’s also no underwriting during a FEGLI open enrollment period. The last such period was in September 2004, and there’s been no announcement of a future open enrollment.

    This week, I’ll review basic FEGLI coverage options. Next week, we’ll go over optional coverage.

    Basic Coverage

    FEGLI is a form of term life insurance. It falls into that category because it doesn’t build up cash value, but FEGLI actually doesn’t have a term, such as 15 or 20 years, like private term insurance does. Federal employees can maintain basic FEGLI throughout their federal careers and into retirement. Employees who opt for no reduction of basic FEGLI at retirement can maintain this level of coverage for life if they are willing to pay for it.

    As an employee’s salary increases, the amount of basic life insurance increases automatically. The value of basic insurance is determined by your annual basic pay rate (including locality pay adjustments), rounded up to the next even $1,000, plus an additional $2,000. So, for example, if Kevin makes $53,400, this would be rounded up to $54,000 and $2,000 would be added, for a total of $56,000 worth of basic life insurance. Employees who are under age 45 have extra coverage without paying an extra premium. If Kevin were 35 years old or younger, his basic FEGLI would pay his beneficiary a $112,000 death benefit if he died. This extra benefit is cut by 10 percent each year between until age 45. After 45, the death benefit is just the basic insurance amount.

    Basic FEGLI also provides an accidental death and dismemberment benefit for employees. And it includes a living benefit for those who are diagnosed with a terminal illness with a life expectancy of nine months or less. FEGLI pays regardless of cause of death — unless your beneficiary causes your death.

    If you’ve waived your FEGLI basic coverage more than a year ago, you can reenroll. If you are not experiencing a life event and it’s not open season, you must take a physical at your expense and submit form SF 2822 to your human resources office within 60 days of the exam. If you’ve had a life event, you have 60 days to select basic or optional coverage.

    For basic coverage, all employees pay 15 cents per $1,000 of salary biweekly, regardless of their age. In the above example, Kevin would pay $8.40 biweekly to maintain his coverage. The cost of basic insurance is shared between you and the government, with the government covering a third of the cost.

    Into Retirement

    Basic insurance follows you into retirement based on your final pay rate, as long as you are retiring on an immediate annuity and have been covered for the last five years of your federal career. At the time you retire, you’ll have the choice of no reduction in coverage, a 50 percent reduction, or a 75 percent cut.

    So, for example, let’s say Leah has a final salary rate of $62,400. Her basic FEGLI is worth $65,000 ($62,400 rounded up to $63,000 plus $2,000). She pays $9.75 biweekly and on a monthly basis the premium will be $21.12 per month (.325 cents x $1,000/month). If she chooses the 75 percent reduction, she will pay $21.12 a month after she is retired until she turns 65. (If she’s already past 65 at retirement, the coverage will be free, but the reduction will begin immediately.) At that time her premiums will end and her coverage will begin to reduce by 2 percent per month until it goes down by 75 percent, leaving Leah a basic FEGLI benefit of $16,250. If she lives to be 98 years old, her beneficiary will receive that amount, and the last time Leah would have paid premiums was either when she retired or when she turned age 65, whichever was later.

    If Leah chooses the 50 percent reduction, she’ll will pay an additional premium of 64 cents per $1,000 per month. That would be an additional $41.60 a month, plus the $21.12 a month shown above, for a total monthly withholding of $62.72. After age 65 (or retirement, if later) her coverage would go down by 1 percent per month ($650) until her remaining coverage was worth 50 percent of its initial value. (In Leah’s case, that would mean it went down to $32,500.) She would continue paying the $41.60 month even after the basic premium ended at 65. She could cancel her choice of this level of coverage, allowing the benefit to reduce by 75 percent, but she would not get a refund of premiums paid.

    If Leah were to choose the option of no reduction in coverage, then she would pay an additional premium of $1.94 per $1,000 per month. So she would pay $126.10 ($1.94 x 65) and her coverage would remain at $65,000 even after she turned 65. But she would have to continue paying this additional premium to maintain the benefit. If Leah retired before turning 65, she would pay the basic premium of $21.12 a month in addition to the $126.10 monthly premium for choosing no reduction.

    Bottom Line

    The 50 percent and no reduction options add an additional expense to FEGLI after retirement and should be chosen only if you can justify paying these additional premiums. Suppose, for example, that Leah adopted her sister’s young children when she was 55, and is now responsible for raising them. She might need to maintain a greater amount of life insurance past 65. If she can’t obtain reasonably priced private life insurance to supplement her basic FEGLI, she might choose the 50 percent or no reduction option for basic FEGLI at retirement.

    Keep in mind that until you are retired and 65, you’ll get basic FEGLI at the same cost — 15 cents per $1,000 biweekly, or 32.5 cents per $1,000 monthly. The coverage doesn’t begin to reduce until you are over 65 and retired. So the question you should ask yourself at retirement is “how much life insurance do I really need to provide protection to my family after I’m 65?”

  30. Choosing Between Term Life and Universal Life

    Investing in a life insurance policy is one of the best decisions you can make in your lifetime. Making this commitment protects family members from incurring financial setbacks in the event that they have to pay for a deceased loved one’s funeral and burial arrangements, existing debts, and mortgages. The survivors of growing families may have additional factors to consider, including childcare expenses and college tuition. In many cases, a life-threatening illness may result in payment of benefits. Most legal contracts exclude some causes of death, such as civil chaos, suicide, and war.One of the biggest challenges about obtaining life insurance is choosing the policy that fits your circumstances. It’s important to consult with a financial expert before making a move. Financial planners have gone through rigorous training to help you make solid investments that align with your situation and manage your resources effectively. Make sure that your financial planner has gone through training and received a financial degree from an accredited institution. Other valuable business professionals that play an integral role in guiding you in the correct selection of life insurance include attorneys, insurance brokers, and estate planners.

    Regardless of who you pick to be involved in this major venture, make sure they’re a qualified professional, preferably a professional with a business education, that’ll explain the specific conditions of each option in detail. Take a look at two significant preferences for many people.

    What is Term Life?

    Term life insurance is typically the most affordable and versatile policy available to consumers. The plan provides basic coverage for a specified time which is commonly five, ten, fifteen, or twenty, although terms with lifespans over twenty-five can also be purchased. Since coverage is given for a pre-determined period, the policy doesn’t accrue cash value.

    Premiums for term life insurance typically start out relatively low. The exact amount varies by the requested length of coverage. As the insured person ages, the premium tends to increase. Renewal fees are usually higher as well.

    Universal Life 101

    Also referred to as a UL policy or cash value plan, universal life insurance is a modernized option for individuals. Premiums are generally more expensive since policyholders receive a long-term arrangement. However, the rates are more consistent and the package not only covers death benefits, but also provides a tax-deferred savings account that can be cashed out or borrowed against after an accumulation of years. Since coverage is constant, there’s also no renewal fees unless the policy lapses.

    Policyholders can choose between two death benefits under universal life insurance: Option A or Option B. Option A offers a level death benefit, meaning that the benefits remain the same for the duration of the coverage. Contrarily, Option B renders the face amount along with the cash value which results in higher premiums than Option A.

    Understanding Which Policy is Right for You

    Most individuals who are young and single with minimal responsibilities choose term life insurance over universal coverage. The cheaper premium tends to fit in better with their budget and buys the basic protection they need at the time. Older individuals with families, however, usually go with universal insurance for more stability and the extra monetary advantage that’s available to them after being covered for a lengthy amount of time.

  31. For some people looking to buy life insurance online, the plethora of options and websites available can seem like a lot. Fortunately, there are a few things that can make the online insurance hunt easier and more enjoyable.

    Perhaps one of the most popular things about online insurance searches is that they allow you to compare prices, features, and special allowances across a broad range of policies and insurance companies. When you make these comparisons, though, be sure that you are comparing like things, as there are many variables within the life insurance sector, including the differences between term and whole life insurance that can take the policy coverage and the premiums available in different directions.
    Social networking sites have changed the way that people shop and learn about things, and life insurance is no different. Consider researching insurance-based blogs and forums where opinions and researched articles abound. These sites can add valuable insights to your life insurance search all in a few convenient locations versus requiring you to search high and low online for the same information.
    Check out customer testimonials. Popular search engines are a great way to start your research and help you find customer reviews on insurance companies. Customer reviews can lend valuable insights into a company.

    Since so much in life revolves around your most precious assets – your family, your home, your future – it makes sense that protecting those things in a financial way should be a priority. When looking online at life insurance options, be sure to read the fine print to make sure you are getting exactly what you thought you were. Research, check the facts, and talk to an experienced and licensed agent to get a policy you can rely on..

  32. Would your family have the financial resources to maintain their standard of living if something happened to you? According to a recent survey, 42% of Americans are not confident their family would be able to live comfortably if the respondent died or became disabled.
    Who needs life insurance? Everyone needs life insurance, especially if family members depend on you financially. No matter where you’re at in life, life insurance can help you and your loved ones achieve financial security.Can life changes affect my life insurance needs?

    Yes, as your life changes, your coverage needs do too. Even if you already have life insurance, you may need to update your coverage, especially when you experience any of these life-changing events:

    Getting married
    Becoming a parent
    Buying a home
    Changing jobs
    Planning for retirement

    What are the types of life insurance?
    There are two basic types of life insurance, term insurance and permanent insurance.Term Insurance
    Term insurance provides protection for a specific period of time (the “term”) and is designed to fill a temporary need, such as covering a mortgage or sending a child to college. Typically, term insurance offers the greatest amount of coverage for the lowest initial premium and is a good choice for young families on a tight budget. Permanent Insurance
    Permanent insurance offers lifelong protection and allows you to accumulate cash value on a tax-deferred basis. This type of coverage is designed to fill long term needs, such as income replacement.

  33. Insuring against risk–car accidents, calamities at home, and yes, premature death–is a crucial aspect of the financial-planning process, yet it’s one that tends not to get a lot of play on Morningstar.com’s investing-centric Discuss forums.

    In a recent thread on Morningstar.com, I asked readers to share how they had approached insuring against the latter risk. Had they purchased a low-cost, no-frills term life insurance policy, or had they opted for a more permanent life insurance policy as part of their financial plans?

    Readers’ responses ran the gamut: Although some were openly disdainful of permanent policies, characterizing them as high-cost and less-than-transparent, others said they have used a combination of term and whole or universal policies and have been satisfied with their decisions. To read the complete thread or share your own approach to life insurance, click here (http://socialize.morningstar.com/NewSocialize/forums/p/299758/3204648.aspx).

    BTID All the Way
    A healthy contingent of posters was unequivocal about using a utilitarian term policy and steering clear of permanent products.

    Jnelson6455 advised, “Buy term and invest the difference–BTID–all the way. My agent replaced my whole life policy and for the same money I had been paying I was able to triple my coverage and still have money to save on my own. Cash-value policies are one of the worst products sold to the middle class. Too expensive to get the coverage needed and too many hidden fees to qualify as a good savings vehicle.”

    Molokoeo is of a similar mind. He used a term policy for income replacement while he was working but has since canceled now that he’s not. “I think that life insurance is one of the most misunderstood and overhyped products on the investment landscape. And I say that with two sisters in the insurance business. When I was working, I carried straight term insurance. Its sole purpose was income replacement at the lowest cost possible. When I retired, and after my daughters were married, I canceled all of my life insurance. I no longer had any earned income to protect (replace), and I reasoned that my widowed wife could easily live on the investments that today support two of us. My daughters were aghast until I assured them that their mother wouldn’t live like a bag lady after I died.”

    FidlStix has done the same. “I’ve always had a hard time pouring money into something I (more correctly, my family) would very likely never need. Nonetheless, I did carry term life until the term was up. Now it’s just my wife and I, the kids are on their own, and I’m on the eve of retiring. My ‘life insurance’ now is to maintain my good health as long as I can with plenty of daily exercise and healthy eating, and to leave my wife with enough retirement to sustain her nicely in case of my premature departure.”

    ColonelDan, like the aforementioned posters, sees little need for life insurance in his post-retirement years. “During my working years I had enough term life insurance to pay off all debts and provide a nest egg were I to die. Now that I’m retired, I have no debt and more than sufficient resources to ‘self-insure’ ergo no life insurance and no premiums!”

    GoneFishin rightly points out that testing the viability of one’s nest egg is a crucial step to take before dropping a term policy. “I’m 65-plus now, empty nest, and will retire in May. My wife will get 100% of pension and Social Security if I pass before her. Per all the retirement calculators I’ve used, we have enough money for retirement to last until we’re 90 years young. My term life policy is due now. We will let it expire.”

    EMFR12 articulated a point made by many of the “buy term” set: If one saves diligently, investment assets will obviate the need for life insurance. “I’ve always been a diligent saver. I looked at different types of life insurance plans and considered the returns and benefits if used as an investment vehicle. In the end, I decided it was best to separate insurance from savings. To me, insurance is meant to protect against loss of current earnings and to protect my family in the event I die early. Savings, specifically retirement savings, is to provide a comfortable living for my wife and me in our golden years. I have a 20-year level term policy that expires when I turn 69. By then I should be set and in no need to ‘protect’ my earnings–dividends, annuities etc. You know exactly what you get with term insurance. It is inexpensive if you buy it in your 40s or earlier, easy to understand, and serves its purpose. For those who like the idea of leaving something for the kids or to provide for funeral expenses, I say, ‘If you saved and planned early you can do both.”

    Turtle took a similar tack. “I bought the simple term life policy through work with for the purpose of protecting my family, and I invested the rest. Now, 40 years later I can sit back and laugh at all those insurance agents that said my plan would not work. I was able to drop the term policy 10-plus years ago and have built a lifetime of security for my family.”

    Several posters, like Turtle, noted that they’d obtained inexpensive coverage via their employers. Madbrain wrote, “For now, I use my generous employer term life benefits. When I switch jobs I port/convert them. That’s been enough to get $2 million coverage on myself and $650,000 on my partner.”

    But poster Blindguy advised those purchasing term policies through their employers to keep an eye on their paystubs. What was affordable coverage in the past might not remain so as they age. “When I received my first pay stub of the year after I turned 55, I was surprised at the drop in take-home pay. So I took a look to find out the reason. Taxes, et cetera were relatively unchanged, but the deduction for my term insurance had risen significantly. Looking into the matter further, the change was not due to a general rate increase from the insurer, but a significant increase–81%–due to the fact I was now in the 55- to 59-year-old bracket. In addition I noted, based on current rates, I would see another 51% increase in premiums once I turned 60. Long story short, I no longer purchase additional insurance through my company plan. I purchased a 10-year term policy equal to two times my salary through our personal insurance agent. The cost savings for the first five years is rather insignificant–just $50 a year. But the savings for the remaining five years will amount to $500 annually, and that assumes the general rates for our company plan will not change in that time.”

    A Combination Approach
    Yet not all readers are sold on sticking exclusively with term insurance. Rabes3019 noted that many of the folks who buy term won’t have the discipline to invest the difference. “Had I bought term and invested the difference, I would have outlived the term and maybe spent the difference.”

    Many posters noted that they’ve used a combination of term life insurance to supplant their income in case of an untimely death, along with whole life and/or universal life insurance policies. Whole life policies provide a death benefit plus accumulating cash balances. Universal life policies also provide death benefits and build cash values, but they allow the insured more flexibility to adjust the timing and the size of premiums, which in turn can affect the cash values and death benefits.

    MLCole shared, “I have a combination approach. I use term for my shorter-term coverage needs (while my children are still young) and permanent coverage for my long-term needs such as estate planning. My universal life has a variable death benefit so upon my death, it pays out the face amount plus the cash value. In my mind, this variable death benefit is especially important if you are aggressively funding the universal life policy.”

    Rabes3019, too, has used the combination of term insurance and a more permanent policy. “As a young couple with three children, we sought the advice of an agent and bought permanent and term from a mutual company. As our income increased, we added to our coverage and our investing program. I did not see them as mutually exclusive, but in balance. We still have our permanent life insurance. Dividends on the policies have been paying the premiums and increasing the insurance since retirement. We plan to leave the insurance for our grandchildren.”

    Ditto for BrainBoy. He dropped term insurance when his children were grown, but has been satisfied with his permanent policy. “When I was younger and had young family to support, I had term insurance sufficient to provide for them in event of my premature absence. At the same time, I purchased a permanent life insurance policy from a mutual insurance company. I dropped the term when only I and my wife were left in the house. Over the years, I now have a cash value in the permanent life insurance that is larger than the entire sum of the premiums paid, and I have purchased paid-up additions which has almost doubled the death benefit. Assuming a long life, I will have 3 to 4 times the amount of cash in the policy and available to be loaned out with favorable tax treatment. I see this as a very nonvolatile component of the bond sleeve of my portfolio.”

    Rathgar helpfully noted the importance of integrating insurance with other investment priorities; though permanent life insurance might be a worthwhile component of a financial plan, it shouldn’t give short shrift to funding other goals. Here’s his checklist: “Step 1: Figure out how much life insurance you need and how long you need it. Step 2: Look at the cost of term insurance for 10, 15, 20 years (or permanent if needed). Step 3: If you are fully funding retirement accounts, college funds and have excess money consider permanent insurance for a portion. Step 4: Always have the ‘conversion option’ built in so you can convert to permanent if you need to and or if your health declines. Don’t buy the cheapest policy, buy a good company, low price with conversion to solid permanent products.”

    Llaroo, as Rathgar advised, has employed life insurance alongside traditional investment assets and has been satisfied with the decision. “We’ve always maxed out our 401(k) accounts and have saved a lot of money in other tax-deferred accounts. We are in the highest marginal tax brackets and have been for many years, and probably will be in a high bracket after retirement. We now have about $500,000 in cash value in permanent life insurance policies that yield 7%-8% year after year, with no dividend or interest tax. The safety of those investments, plus the tremendous tax diversification they will provide when we retire, make the return far better than we could have obtained, or obtain going forward, in the markets. The policies are a key piece of our portfolio.”

    However, such lush returns are far from guaranteed. Vandy73 argued that timing is key when purchasing a permanent type of policy. “I think the key to buying whole (or some form thereof) life is to do it when you’re young (lower rates–make sure they’re fixed rates) and when interest rates are high, so the costs to purchase are usually lower.”

    Rlest0426’s post mentions yet another type of permanent insurance product, variable life insurance. Such policies also build cash value, which can be invested in an array of investment products. “My whole life policies are a mix of variable and traditional whole life. If I could do it over I think I would have opted for more traditional whole life, less variable given the market’s performance.”

    Finally, Danahan, a term guy, offered a piece of wisdom that both BTID and cash-value policy adherents can agree on: “The best life insurance strategy of all? Live, love, and laugh.”

  34. The significant other of an acquaintance passed away and while I sent my condolences I couldn’t help but wonder how she would move through financially this year. I kept thinking did he have life insurance? Were they a two income household? Did she depend on him to help her with paying the bills? Of course these things run trough MY mind right? I am praying that in this economy that she will be OK.

    I turned to hubby and asked about our life insurance and I feel we should have more. We don’t have children or any significant responsibilities so it’s not something I’ve ever really felt compelled to look into outside of what we have now. But with talks of babies on the horizon and owning a home I want to make sure that we have everything in place.

    So what do we get? Term? Whole? Universal? How about the kind where we get some of our money back after a certain time? Hubby has a medical condition, how will that factor into the monthly cost? What policy gives us the maximum benefit with minimum monthly installment? Can life insurance be used for retirement as the policy builds cash value?
    If you’re part of a two-income family: Today, 61 percent of married women bring home a paycheck (compared to just 23 percent in 1950). Husbands and wives are economic partners. Today’s two-income families depend on both pay checks to make ends meet.(Figures for 1995. Source: Washington Post 1/22/97) If anything happened to you — and the income you generate — would your family be able remain in their home? Would your children be able to achieve their education goals? Would your family suffer a severe financial loss? Adequate life insurance can replace your income, remove uncertainty and help guarantee your family’s financial security.
    If you’re a single woman heading a house-hold: Chances are that you have little if any life insurance, according to industry studies — in spite of the fact that you have major financial responsibilities. Of all life insurance policies sold in 1997, only 4 percent were purchased by divorced or widowed women.(“The Women’s Market: Myth & Reality,” LIMRA International, 1999) As a single parent, you may be the sole breadwinner, responsible for the support and care of your children. Your need for life insurance is even more crucial than in dual-parent households, which will have another source of income if one parent dies.
    If you’re a full-time home maker: Far from a dying breed, nearly two out of every five married women are full-time mothers and home makers. This is just as much a partnership as the two-income family in that it takes the efforts of both to make the household function. Your services, while in many respects beyond value, are worth tens of thousands of dollars a year. How would your husband and children manage without you?
    If you’re a single woman: Whether you’re single-never-married or divorced-no-kids-at-home, your need for life insurance may be even greater than for married women. That is because being single isn’t always the same as being without responsibilities. You may have loans. Plus, should anything happen to you, there will be final expenses, which can run into the tens of thousands of dollars. These obligations — which could fall on parents and other loved ones — can be met with life insurance. Just as important, life insurance purchased today can protect your future insurability as you get older. If you eventually marry, your coverage will help protect your husband and, possibly, children. If you choose to remain single, your life insurance can accumulate cash value to help provide a secure retirement for yourself. A cash value life insurance policy can help you accumulate funds on a tax-advantaged basis to supplement your other retirement income.

    I’m sure the woman I spoke of at the beginning of this post didn’t think the death of her loved one would happen so soon or suddenly. Death is never something we want to think about happening to those we love but in our wisdom we should make sure that we’re prepared for it nonetheless.

  35. Many people today have never heard of longevity insurance, but it is something everyone should understand. This is a relatively new insurance product and not all annuity suppliers understand how it works. It’s basically an annuity where you make a lump sum payment and your money is held for a particular period of time. If you are still living at the end of this pre-determined time, you receive annuity payments for the rest of your life. It can be seen as risky if you pass away before the end of the period and receive no benefit. A good side of the this product involves taking smaller payments in the future and adding death benefits or adding your spouse onto the policy. There are a lot of options with longevity insurance, but it can be a complex product.

    J. Brendan Ryan wrote “Longevity Insurance May Be For You” on Cincinnati.com and talks about all of the risks associated with retirement these days. Millions of Americans are not prepared for their retirement years, and without knowing how long you will live, it can be hard to gauge how much money you should save. Annuities and retirement insurance products can be a great way to mitigate financial risk during these years. They often provide a lifetime source of income that won’t change if you live longer than you thought. This is often referred to as a “mortality gain”. And conversely, if you die earlier than you planned, you will experience a “mortality loss”. Annuities can be thought of as longevity insurance to remind you how important this product can be for financial security during retirement. Many consider this type of insurance even more valuable that typical life insurance policies since you reap the benefits while you are still living. Life insurance is an important product, but basic policies are to supply benefits to loved ones after you are gone. Take the time to talk to your financial advisor about longevity insurance and annuities to secure your retirement future now.

  36. One of the most popular posts here at CFO is my analysis of Gerber Life Insurance. Since it’s over four years old, I thought it was time to revisit the issue and ask again: Is Gerber Life Insurance worth the cost?

    A few months ago, I discussed when you need (and don’t need) life insurance. The simple answer was that you should buy life insurance if the death of the insured would cause a financial hardship. Usually, that means a breadwinner or caregiver – for example, if Dad is the main source of income and his death would leave the family without enough money to get by, then a life insurance policy for Dad would be a great idea.

    But the death of a child, as tragic an event as it is, doesn’t normally present this type of financial hardship. That’s why I scoffed at Gerber Life Insurance before my children were born – it seemed designed for suckers.

    However, Gerber’s Grow-Up Plan is a whole life policy. Whole life insurance is a little more complicated than term insurance, which only pays out if you die within a specified period of time. With whole life insurance, the policy isn’t for a set period but rather for the rest of your life. Partly because of that, the premium is considerably higher than the premium for a term policy. And, unlike with term insurance, part of the premium of a whole life insurance policy goes toward an investment component. Generally, the return on the investment portion of a whole life policy is such that it’s not considered a good investment, i.e., you could get a better return on your money elsewhere.

    So I look at the Grow-Up Plan not so much for the life insurance component, but as an investment option. Premiums are determined by your child’s age, gender, and state of residence, and are guaranteed to remain the same. Coverage is automatically doubled when the child turns 18. The policy’s cash value will be at least equal to or greater than 100% of the premiums paid after 25 years. As an adult, the originally-insured child is guaranteed the right to purchase up to 10 times the original coverage amount, regardless of health, occupation, and other factors that may render him or her ineligible with other companies.

    For my 7-year-old, a $50,000 policy would cost $37.40 per month, or $448.80. Paying $448.80 each year for the next 25 years is a total expense of $11,220. If I took at that $37.40 per month and invested it in a mutual fund that earned a conservative 3% for 25 years, I would have $16,857.90 – that’s an increase of $5,637.90. If the mutual fund grew at 5%, my total would be $22,796.52. So if I put the money toward the Grow-Up Plan, in 25 years, I’d have cash value of $11,220 (and possibly more), but if I invested the money in a mutual fund, I’d probably have quite a bit more. The tradeoff is that I wouldn’t have the insurance payout.

    Since the coverage doubles but the premium remains the same at age 18, I wondered what would happen if you bought the policy at age 14 (the last year a child is eligible for the Grow-Up plan). The premium on a $50,000 policy for a 14-year-old boy in California would be $47.48 per month, or $573.36 per year. Right now, I’m seeing annual premium quotes for $100,000 whole life polices for 18-year-old males in California for as low as $342. So the $100,000 whole life policy itself doesn’t seem like a good deal.

    My non-expert conclusion is that if you think your child is unlikely to be eligible for life insurance when he or she is older, the Grow-Up Plan is an option you may want to consider now. But it seems like everyone else would be better off investing the money elsewhere – say, tax-advantaged vehicles like 529 plans, Coverdell Educational Savings Accounts, or even your Roth IRA.

  37. If you are considering getting life insurance, make sure that you are looking at term life insurance, and not whole or any other type of policy. There are a lot of insurance options out there, and you usually have to go through an insurance broker who has a financial incentive to steer you into something that costs more than it should. You could very well end up with something more expensive than you really need.

    Term vs. Whole Life Insurance

    Term life insurance is just like it sounds: it is life insurance for a set term. A term can range anywhere from 1 year up to 30 years, or sometimes even longer. On the death of the insured, as long as it falls within the term, it pays out the amount of the policy to the beneficiary.

    Whole life insurance, however, takes everything you get with a term policy and attempts to add an investment component. Some of these investment components are simple money market funds that accrue interest, but others invest in bonds or seek to mimic indexes like the S&P 500. The policy builds a cash value in this investment component which you can borrow against or cash out after a certain time. The most common types of whole life policies are traditional whole life, universal whole life, and variable whole life.

    Whole life insurance is more expensive because you’re not only paying for insurance, but you’re also paying for the investment portion.

    The Life Insurance Math

    Let’s look at a 25 year old male, excellent health, and non-smoker. The policy is for $1,000,000 for a 30 year term.

    For a term policy, you would pay about $80 per month, or about $960 per year.

    For a traditional whole life policy, while rates and accounts vary greatly, you can see a premium payment of around $250 per month, or $3,000 per year. Remember, this is much more expensive than a traditional term life policy.

    Let’s just look at the difference between these two policies. The term policy has no cash value, but you get to keep the difference in the premium you would have shelled out for the whole life policy ($2,040 annually).

    After 10 years, the cash value of the whole life policy would be roughly $28,000. This money is also after-tax, since it is an insurance investment.

    After 10 years, if you just invested the difference between the policies, you’d have a before-tax investment value of $36,321, assuming a 8% rate of return. Even if you include taxes at the 28% rate, you would still see an after tax return of $31,691. This is over $3,000 more than the cash value of the whole life policy.

    What You Need To Know

    It is also essential that you keep this is mind: term life is simple – a straight term, nothing fancy. But whole life is a complex instrument that is designed to return more than a term life policy to the insurance company.

    Since it is complex, you also have to speak to an insurance representative to even get a quote, and policies vary widely from insurer to insurer. The most easily compared metric on whole life policies is the internal rate of return (the yield on the policy minus fees). With a little analysis, you can figure out if the policy will provide a decent return, and you may even be able to figure out the minimum cash value at any given time.

    For warning, a whole life policy usually doesn’t even yield a worthwhile return unless you hold it for over 20 years. Then it starts to be a little better, but still not usually on par with outside investments. Second, whole life policies usually have surrender charges, so if you accidentally bought one and now want to switch to a term, make sure you read the fine print. You could see large fees required to get out of your whole life policy.

    Finally, since 30 years is a long time, you want to make sure that the insurance company you are insured with will be around. Insurance companies are rated by two main companies – S&P and AM Best – who look at the company’s ability to pay claims. Most financially sound insurers are rated AAA, so make sure that you go with the best.

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  42. Texas Life Insurance I was recommended this web site by my cousin. I’m not sure whether this post is written by him as no one else know such detailed about my difficulty. You’re wonderful! Very few people want to have a conversation about Term Life Insurance Rates because when they do, it means they will need to talk about the, “D” word. You know which word that is, right? I’m talking about death, as in dying or expiring. The fact is; there is absolutely no navigating your way around passing away. For decades, men and women have searched for the elixir to living forever but they have never found it. Some people have resorted to plastic surgery in order to maintain their looks, thinking that would help them to live longer but it doesn’t. It is irrefutable and indisputable, at some point; everyone is going to pass from life into death. Life insurance essentially forces us to think about our own mortality and plan for it. When a parent seeks out life insurance, he is setting the stage for his family to be taken care of financially. This move protects his family from financial hardships after he passes.

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  45. By investing in life insurance, almost anyone can transfer the financial risks of dying early, guaranteeing a payout for family members who might otherwise be left in economic turmoil. Today’s life insurance policies, however, often come with features borrowed from the investment world, blending traditional insurance with attributes of a mutual fund account.Those who haven’t purchased a policy may be familiar only with “term” life insurance, which covers the owner for a set period of time, say, until their child graduates from college. If the owner lives past that date, the plan expires and is worthless.

    But some life insurance policies are “cash value,” which means the fees, or premium, initially are greater at the start of the policy than they would be in a term policy. The excess premium is then invested in a “separate account,” either by the insurer or in an account controlled by the policy holder, building up cash value. Any investment gains can be used in a few ways: to increase the death benefit, to borrow against for any use or to keep the policy in effect if you stop paying monthly premiums. Policies that offer this investment feature come with significantly more complex terms, and are offered by salespeople who may earn a significant commission off your initial premium.

    In variable life insurance policies, the cash value and benefits may actually decrease or go away completely depending upon the performance of your investments. The National Association of Insurance Commissioners website offers a downloadable consumer guide to life insurance policies that urges prospective buyers of variable life policies to obtain a prospectus from the company and to read it carefully.

    Tax Benefits of Investing in Life Insurance

    Tax benefits are chief among the advantages of a variable universal life insurance policy. Each year’s earnings on the investment portion of the policy are not taxed, and the taxable gains on policies that are later cashed out can be reduced by the amount of insurance protection the plan provided. And if the policy holder dies, the gains are not usually taxed.

    Similar tax benefits are also offered through pure investment accounts, such as 401k plans, IRAs and Roth IRAs; some financial advisers recommend that these choices be funded to the maximum amount before an investment-oriented insurance policy is considered.

    In addition, insurance policies may offer a wide variety of investment options, including stocks, bonds, balanced mutual funds, international mutual funds and money market accounts. Investments may also be tied to a major stock market index, like the Standard & Poor’s 500. These are often similar to what might be found in a retirement investment account.

    Flexibility of Investing in Life Insurance

    The death benefit on a variable universal plan may be increased with a lump-sum payment, or borrowed against in the event of a pressing financial need like a medical emergency. The ability to skip payments is also considered an advantage. In addition, the investment account may be shifted to more conservative or aggressive options.

    Fees and Complexity of Life Insurance

    Critics of variable universal life insurance plans say that the tax benefits are outweighed by a variety of fees that eat away at returns. These fees may be misunderstood by the policy holder, disclosed in long prospectus documents but glossed over in sales pitches. These policies may charge a fee, often 4% to 6%, on each deposit; annual contract fees; administrative charges on the account, and expenses on the investment options themselves. Many of these plans come with “surrender” charges of $10,000 or more in the event the policy is cashed out before a certain number of years. While other investment accounts come with a variety of fees, critics of life insurance policies say the true cost of the plans are difficult for many buyers to comprehend.

    Tips for Investing in Life Insurance

    If you decide that a variable universal life insurance policy offers appropriate benefits, you might consider purchasing a plan directly from the insurer and skipping the salesperson. These include Ameritas, USAA life and TIAA-CREF. Though you won’t be enriching a salesperson, there are still sales costs that should be explained by the company’s agent. Here are some other tips:

    Consider funding your other tax-advantaged retirement accounts before opening a variable universal life insurance policy. Term life insurance, however, continues to provide a unique benefit.
    Holding a cash value insurance plan until death or retirement increases the likelihood that the plan will be an appropriate investment.
    Dodge big fees, commissions, and surrender charges by investigating “low-load” insurers.
    Read the prospectus, which explains the benefits and risks in relatively plain language, without the spin of a sales pitch.

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