Life Insurance References

III enumerated the two principal types of life insurance:

<TERM and WHOLE LIFE>

WHOLE LIFE >  Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

When I recently opened a savings account at the nearest bank in our area, I was amazed that the product I got already includes a life insurance. Though I already have my own policy, I still availed this service since. Bank companies, credit cards and lending institutions are now offering life insurance to pay off your outstanding loans in the event of your death. For each life insurance benefit on your life dedicated to paying off a loan, you should record,

• The full name of the lending institution through which you obtained the life insurance
• The loan number and issue date of the loan
• The name of the person or office to contact when it’s time to file a claim
• The policy number of the life insurance policy that pays off the loan

Thus, this service is a good deal for each and everyone.

You should always keep a record of the following details regarding your life insurance policy. This will enable you and your beneficiaries to claim easily when unfortunate events happen.

• The full name of the life insurance company that issued the policy
• The city and state of the home office of the company that issued the policy
• The name and U.S. headquarters of the group, if the issuing company belongs to a group of companies
• The policy number
• The date the policy was issued
• The amount of the death benefit
• The name and address of the agent/broker who sold you the policy
• The type of policy (e.g., term, whole life, etc.)
• The location of the original life insurance policy

by: Christine Zafra

Having a life insurance is already a good investment. When something happens to you, you know that you will get something or that your heirs will already have something to start with. It might take a lifetime for a person to receive the fruit of his/her investment but it is better that way than having nothing at the end. Instead of investing your money in cars, it might be better to invest it in a life/health insurance. This situation can definitely prove that health is wealth. It is like taking care of yourself and having check ups while making money in your office.

Photo taken from http://blog.whathappensnow.com

III enumerated the two principal types of life insurance:

<TERM and WHOLE LIFE>

TERM > Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies—level term and decreasing term.

* Level term means that the death benefit stays the same throughout the duration of the policy.
* Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.

An interesting read on the myths and truths in life insurance from Dave Ramsey.

Myth: Cash value life insurance, like whole life, will help me retire wealthy.
Truth: Cash value life insurance is one of the worst financial products available.

Sadly, over 70% of the life insurance policies sold today are cash value policies. A cash value policy is an insurance product that packages insurance and savings together. Do not invest money in life insurance; the returns are horrible. Your insurance person will show you wonderful projections, but none of these policies perform as projected.

Example of Cash Value
If a 30-year-old man has $100 per month to spend on life insurance and shops the top 5 cash value companies, he will find he can purchase an average of $125,000 in insurance for his family.  The pitch is to get a policy that will build up savings for retirement, which is what a cash value policy does. However, if this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only $7 per month, not $100.

Wow! If he goes with the cash value option, the other $93 per month should be in savings, right? Well, not really; you see, there are expenses. Expenses? How much? All of the $93 per month disappears in commissions and expenses for the first 3 years. After that, the return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America, Kiplinger’s Personal Finance, and Fortune magazines.  The same mutual funds outside of the policy average 12%.

The Hidden Catch
Worse yet, with whole life and universal life, the savings you finally build up after being ripped off for years don’t go to your family upon your death.  The only benefit paid to your family is the face value of the policy, the $125,000 in our example.

The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie jar! At least after 3 years you would have $3,000, and when you died your family would get your savings.

If you follow my Total Money Makeover plan, you will begin investing well.  Then, when you are 57 years old and the kids are grown and gone, the house is paid for, and you have $700,000 in mutual funds, you’ll become self-insured. 

That means when your 20-year term is up, you shouldn’t need life insurance at all - because with no kids to feed, no house payment, and $700,000, your spouse will just have to suffer through if you die without insurance. Don’t do cash value insurance! Buy term and invest the difference.

III Org stated that:

In most cases, if you have no dependents and have enough money to pay your final expenses, you don’t need any life insurance.

If you want to create an inheritance or make a charitable contribution, buy enough life insurance to achieve those goals.

If you have dependents, buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur to replace services you provide (for a simple example, if you do your own taxes, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.

There are different kinds of life insurance, there’s temporary, permanent, whole life and a lot more.

Source of Photo: http://www.stoel.com/images/Area/5113_Image.jpg

As explained in Wikipedia.com , Temporary life insurance provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. While Permanent Life Insurance s life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years).

Source of picture: http://www.loancalc.com/mortgage-calculator.jpg

One important tool in getting a life insurance policy is to answer a life insurance calculator. There are numerous websites that provides that same service. You can try out
Forbes.com (http://www.forbes.com/tools/calculator/life_insurance.jhtml).
Enter the income you’d need, the number of years you’d need it and how much investment return you think you’d earn.

A life insurance calculator will calculate your needs. Debts should be included when using the calculator. Some life insurance such as bygpub.com (http://www.bygpub.com/finance/LifeInsCalc.htm) calculators would include the expenses per month, funeral and college expenses.

So before you sign that contract, make sure to discuss these things with your agent to ensure your family’s future.

Parties to contract, according to Wikipedia, is explained here.
There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe’s life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it.

The beneficiary receives policy proceeds upon the insured’s death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner may change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.

In cases where the policy owner is not the insured (also referred to as the cestui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an “insurable interest” in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The “insurable interest” requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).