Life Insurance References

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)).

When you apply for an insurance, beneficiaries are always found in the agreement. III explains the two levels of “beneficiary“:

Your life insurance policy should have both “primary” and “contingent” beneficiaries. The primary beneficiary gets the death benefits if he or she can be found after your death. Contingent beneficiaries get the death benefits if the primary beneficiary can’t be found. If no primary or contingent beneficiaries can be found, the death benefit will be paid to your estate.

As part of naming beneficiaries, you should identify them as clearly as possible and include their social security numbers. This will make it easier for the life insurance company to find them, and it will make it less likely that disputes will arise regarding the death benefits. For example, if you write “wife [or husband] of the insured” without using a specific name, an ex-spouse could claim the death benefit. On the other hand, if you have named specific children, any later-born or adopted children will not receive the death benefit—unless you change the beneficiary designation to include them.

There are really no certainties in life. Things can change in an instant – sometimes the changes are small, sometimes big.

This uncertainty in life is why you need to have ample and sufficient life insurance that covers your needs and is relevant to your current situation. Make it a point to review your insurance plan at every year to evaluate and make changes to make it more appropriate your life. Depending on the events (like a kid moving out and going to college, a new job, or a new child) in your life, you can opt to have more or less coverage.

It may seem like a small thing, but life insurance show it’s important in the long run, and when the unthinkable happens, it’s better you have one rather than none.

Medic Aid and the Cobra initiative are to get a much needed boost under the proposed economic stimulus package should it pass deliberations from the house. The sheer numbers of jobless people are going to benefit from the stimulus package giving them accessible health care during this recession. Health care costs are on the rise and along with jobs go medical and other health related benefits. Employers who have managed to stay in business have been contemplating reductions in their contributions but with this new proposal, this might not be necessary.
The millions of people who fall in the gap of uncovered individuals who used to be unqualified will also get help with adjustments to the selection/approval criteria. The recently passed SCHIP has boosted the ability of children to get the health care coverage they need and such would be the case for these jobless people. The health care industry is under strain from the lack of funds as the needy increases which makes this welcome news indeed.

Recession, a word that has been avoided (but financial experts agree that the US economy was already in recession since December 2007) by the Federal Government but today’s economic conditions cannot cover up the reality. With the UK government, also publicly acknowledging that their economy is on the rocks the stark realization that the global economy is going to get worse. And it has indeed gotten worse with major players torn and ripped to pieces. While most have managed to skimp bankruptcy with assistance from the government, they have had to make revisions to their overall structure dividing assets and selling stocks to other companies in order to get hold of much needed cash.
Life Insurance providers have managed to stay on top the other forms and has remained stable with proper management and superb adjustments made to their operations. Home, property and other forms of insurance policies have dropped considerably in sales due to people spending less and less. Recession is here with no end in sight, but with ample life insurance, even the uncertainties of life can be taken care of, leaving a safety net for the ones left behind.