Posts Tagged ‘life insurance policy’

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Buying Life Insurance on a Budget: what you Need to Know

Wednesday, March 10th, 2010

You know you need life insurance, but your budget is near its breaking point. What do you do?

The answer is simple: you owe it your loved ones to find the money in your budget to purchase life insurance. However, given the highly competitive life insurance business, you can be sure to find affordable and comprehensive life insurance.

Whole Life Insurance vs. Term Life Insurance

The most affordable route to take when purchasing life insurance on a budget is term life insurance. Many life insurance agents will push whole life insurance policies because of the big commissions they receive. Make no doubt about it: whole life insurance policies do have their place, but if finances limit you, a term life insurance policy is certainly the next best thing.

Many individuals choose term life insurance policies because they provide excellent coverage for a certain time period; this may be during the time they have a mortgage, or when their children are young. Whatever your reason for choosing a term life insurance policy, make sure it covers your debts so that you can best take care of your family financially in the event of your death.

Longer Term Policies and Better Rates

Because of the competitive nature of the life insurance business, it is quite simple to find great policies, with high death benefits, for as long as 30 years. And, when considering the price difference between whole life insurance policies and term life insurance policies, the choice is quite simple for most individuals: term policies win the race.

For individuals on a budget, consider term and take out the largest term life insurance policy that you can comfortably afford. Your term life insurance policy should cover your mortgage, your debts, your funeral and burial costs, and any other monies that you want to leave to help provide financial support for your family.

Do your research and compare a number of life insurance policies through different life insurance carriers. However, don’t automatically choose the cheapest policy; instead, research companies and decide which one has the best reputation, history and financial standing so your policy is protected.

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Q and A: Choosing a Beneficiary for your Life Insurance Policy

Monday, March 1st, 2010

A comprehensive life insurance policy should have a chosen beneficiary. However, many individuals are unsure of the purpose of a beneficiary and the role your beneficiary plays in your life insurance policy.

Q: What is a beneficiary on a life insurance policy?

A: A beneficiary is the person named on a life insurance to receive your death benefit. The beneficiary will often be a spouse, child or family member; however, it may be more than one person, as well as a charity, a trustee of a trust or your estate. Life insurance policies that don’t have a named beneficiary will be paid to the deceased’s estate.

Q: What is the difference between a primary beneficiary and a contingent beneficiary?

A: You may have noticed that your life insurance policy has both a primary and contingent beneficiary. A primary beneficiary is the primary person who is named to receive your death benefit. A contingent beneficiary is the next beneficiary in line, should the primary beneficiary not be able to be located.

Q: Is it necessary to choose a beneficiary, since my life insurance policy will go directly to my estate and can be distributed at that time?

A:  Probate proceedings can often delay the distribution of your life insurance policy, and the cost of probate could take away from your life insurance benefits, so it is best to name a beneficiary to avoid the probate process. Keep in mind that you can change your beneficiary at any time, so don’t delay naming a beneficiary in fear that you may change your mind in the future.

Q: When should I re-evaluate my life insurance beneficiary designations?

A: Any time there is a life change you should reevaluate your life insurance policy. Some of the events that may change your beneficiary status include: marriage; divorce; birth or adoption of a child; and changes in relationships. It is also best to review your life insurance policies on an annual basis to ensure that they are still meeting your financial needs.

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Alcohol Use and Life Insurance Premiums

Tuesday, February 23rd, 2010

How do life insurance companies view alcohol use? How much alcohol use is deemed to be alcohol abuse?

For those individuals who occasionally enjoy alcoholic beverages, life insurance premiums will not likely be affected. However, heavy alcohol use can have an affect on your health and your life expectancy, which means that life insurance companies will likely frown upon insuring someone who engages in frequent, heavy drinking.

The Effects of Alcohol Abuse

From shorter life expectancies to a host of health problems, including heart disease, stroke, depression and liver disease, heavy alcohol can have a detrimental affect on a person’s life. So it is no surprise, then, that life insurance companies are very interested in the amount of alcohol you assume when it comes to applying for a life insurance policy.

Social Drinking vs. Heavy Drinking

Social drinking will likely not affect your life insurance rates; however, drinking as little as two alcoholic drinks daily can take you out of the running for preferred rates. Any more than two alcoholic drinks daily can even knock you of standard rates. In short, the more alcohol you drink on a daily basis, the better the likelihood of paying much, much more in premiums than non-drinkers.

And, depending on the severity of alcohol abuse, an insurer could potentially deny a life insurance application altogether. If your medical history shows alcohol abuse, you can expect to be denied for a life insurance policy.

Many times, life insurance rates will offer drinkers a rated policy, which essentially means that the applicant must pay additional premiums, which could end up costing them big.

Your Life Insurance Medical Exam

Don’t expect to hide your alcohol use from your life insurer, as the typical life insurance policy requires a medical exam, which will likely include both blood and urine tests. The insurer may also ask for a liver function test if you have a history of alcohol abuse; this test may show liver disease or cirrhosis of the liver.

In addition, if you have a DUI arrest on your driving record, you can expect higher life insurance premiums. Any type of drunken driving arrest or conviction on your record raises a red flag with insurance companies, thereby resulting in higher life insurance premiums or even denial of life insurance benefits.

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Understanding your Life Insurance Policy’s Terms and Exclusions

Tuesday, January 5th, 2010

A comprehensive life insurance policy is crucial for the protection of your family in the event of your death. However, not all insurance policies are created equal, so it is up to you to understand the terms, conditions and exclusions of your life insurance policy so that you can be assured you have secured a premium life insurance product.

The provisions and exclusions of any life insurance policy, in short, detail how the policy will pay out in the event of your death. There are a set of common provisions in any life insurance product, which include:

  • Ownership clause - The ownership clause of your life insurance policy states that you own the life insurance product as long as you are alive. The ownership clause allows you, as the owner of the policy, to designate beneficiaries, make all decisions regarding the policy and make all decisions regarding the cash value of the policy.

  • Grace period provision - The grace period section of the insurance policy details the time frame during which you can make your premium during the policy’s grace period (the grace period for a monthly premium is typically 30 days). If you are unable to make a timely payment, your policy may be cancelled by the insurance company, which is where the policy’s reinstatement clause comes in.

  • Reinstatement clause - The reinstatement clause in your life insurance product allows you to reinstate the policy and continue receiving benefits. There are certain conditions, however, that you may have to meet before reinstating your policy.

  • Incontestability clause - The incontestability clause protect you, the policyholder, from a denial of benefits due to misrepresentation or false information. Most insurance companies are very particular about health exams because of this type of clause.

  • Suicide clause - Most policies have a suicide clause that prohibits your family members from drawing on the policy if you commit suicide within two years of taking out the policy.

  • Dangerous activity clause - Most policies prohibit your family members from drawing on your policy if you die during participation in a dangerous activity, such as sky diving or auto racing. It is because of this clause that it is important to point out your participation in any type of dangerous activity to your insurance agent upon applying for a life insurance product.

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Why your High Cholesterol Levels Affect your Life Insurance Rates

Thursday, December 3rd, 2009

Your ability to obtain a great life insurance policy, at a competitive rate, is dependent upon many things, including your cholesterol levels! Besides your age, your weight and your overall level of health, there are many things that can’t be seen that impact your ability to obtain life insurance as much as the obvious.

Because high cholesterol levels are linked to coronary heart disease, and coronary heart disease is the number-one killer of both men and women in the United States, it only makes senses that life insurance companies are more than interested in the health of their applicants; in particular, their cholesterol levels.

High Cholesterol Equals Deadly Consequences

The Centers for Disease Control estimates that one in five Americans has high cholesterol. It is because of this fact, and the fact that many people with high cholesterol suffer a stroke or heart attack, that life insurance companies have given this health topic great attention. In fact, if you have high cholesterol, you can be sure that you will end up paying higher premiums than those individuals with low blood cholesterol levels.

Testing for High Cholesterol Levels

During the physical exam for life insurance, you will likely be given a physical, which includes blood work. Among other things, your blood will be tested for cholesterol levels. It is important to realize, however, that individuals who previously had high blood cholesterol levels, but are now successfully controlling them, will likely not be penalized.

Although each insurer’s definition of high cholesterol is different, you can generally expect to be penalized for your cholesterol if your bad cholesterol, or your LDL cholesterol, is above 100, or if your overall cholesterol levels are above 200. You can check with your insurer regarding their requirements for blood cholesterol levels.

What to do Before Applying for Life Insurance

The best thing you can do before applying for a life insurance policy is to get a full physical exam from your doctor, including blood work. If your doctor finds that you have high blood cholesterol levels then you can start being treated, therefore remedying the situation before you apply for life insurance.

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How to Choose the Best Life Insurance Policy

Monday, November 30th, 2009

Choosing life insurance should be a multi-step process. Your ability to obtain the best insurance, at the most competitive rates, involves hard work on your part.

Although most people don’t give life insurance too much of their time - after all, it is often an unpleasant topic to think about - it is important to research your options and consider both your and your family’s needs when choosing a life insurance product.

To do this, there are a few steps you should take:

  • Consider your options regarding insurance providers. Do your homework and research a variety of insurers. Check out whether the company is fee-based or commission-based, and don’t forget to research the company’s history, performance ratings and customer-service reputation.

  • Consider your coverage needs. In order to determine the value of your life insurance policy you should consider your needs, for both yourself and your family. Many insurers, for example, recommend that your life insurance policy value equal at least two to three years of your annual income. You may choose your life insurance amount based on your children, your spouse or the amount of money it would take to pay off your mortgage, for example. Many life insurance companies offer easy, convenient online calculators that help you decide how much life insurance you may need to protect your family and care for them in the event of your death.

  • Decide which policy is right for you and your budget. There are many different life insurance products, including term life insurance and permanent life insurance. What works for one individual may not work for another; in other words, your decision will be a personal one, based largely in part on your budget. Your decision to purchase a particular life insurance product may be based on your ability to cover short-term expenses, or it may be based on your age.

  • Re-evaluate your circumstances and your needs on an annual basis, and make changes to your policies, if necessary. Your circumstances can change at any given time, so it is important to make sure your life insurance policies reflect both your and your family’s needs.

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Evaluate the Pros and Cons of Life Insurance Settlements

Tuesday, November 10th, 2009

If you’re thinking of purchasing a new home, or suddenly in the need of liquid cash, experts generally agree that opting to settle your life insurance policy may be a realistic option; however, experts also commonly reinforce the issue that settling one’s life insurance can result in potentially large losses on the policy’s value.  A life insurance settlement essentially involves a broker offering to purchase the value of your life insurance policy in exchange for liquid cash.  Oftentimes, this exchange allows the broker and / or 3rd party investors to pay for your policy in order to reap financial benefits in the future.  In fact, retirees are often targeted by companies with offers to exchange their life insurance policies for an immediate sum of money, as settlements can lead to incredibly lucrative payouts for investors.

Life Insurance Settlements

If a broker ever offers a sum of money or a payment in exchange for your policy, keep in mind that the broker will only be offering to pay for a mere fraction of the policy’s actual value.  If you choose to take the broker’s offer, then the broker generally will sell your policy to an interested buyer.  The buyer will then make the payments for the premiums of your policy.  While this sounds like a fairly innocent business exchange, the reality of the financial implications can be quite devastating.

For example, if a 70 to 80 year old woman has a life insurance policy that has a total worth of $1 million, then a life insurance settlement broker may be interested in offering the woman an immediate payment of potentially $250,000-and possibly more!  While the instant cash may undoubtedly have its perks, the broker most likely sold off the plan to an investor; therefore, once the initial policy holder passes away, the investors are able to receive the $1 million life insurance value.

While the concept of profiting off others’ demise often strikes many individuals as offensive, this process of exchange between policy holders and brokers has become a fairly common and lucrative investment for some individuals.  Ultimately, before making the serious decision to settle your policy, meet with your financial advisor and / or insurance agent to evaluate the pros and cons for your unique financial circumstance and needs.

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Can Your Life Insurance Policy Protect Your Pets?

Monday, November 2nd, 2009

While life insurance policies are certainly ideal for individuals seeking to protect their loved ones from financial distress in the aftermath of one’s death, some policy holders have expressed interest in extending coverage to include their beloved pets as well.  While each life insurance policy will vary, some life insurance providers have created new forms of pet life insurance to help offer protection against the financial burdens associated with a pet’s demise.

Life Insurance for Pets

If you are interested in pursuing life insurance protection for your pet, then an array of major companies may be able to offer you unique policies with personalized features.  Often known as pet replacement insurance, pet life insurance can offer compensatory amounts of varying values, with some plans even providing benefits up to the amount of $10,000 or more.  With this coverage feature, a policy holder is compensated for the loss of their pet in order to regain financial standing for their “investment.”

Ideal Candidates for Pet Life Insurance

As each pet owner invests unique costs and efforts into the training and maintenance of their animal, not all pet owners may benefit from animal life insurance protection.  Generally, ideal candidates for pet life insurance are individuals with large vet bills, training costs, grooming costs, and other major expenses invested in their animal’s upbringing.  For example, individuals with pure-bred dogs opting to have their dog compete in competitions often carry large financial burdens and expenses for this pursuit.  As a result, the loss of one’s animal can force a pet owner to be subjected to potential financial losses from various competition rewards and prizes.  In such case, compensation for the loss of one’s pet can help trainers and owners regain their footing in order to potentially re-invest in a “show dog” for future competitions.

To find out if you may benefit from pet life insurance policies, ask your current provider about any available programs or contracts.  Since pet life insurance is a relatively new and unique insurance option, some pet owners may need to research new companies to find the most optimal coverage for their personal pet-based needs.

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Refusing to Retire: How to Find the Best Life Insurance Plan if You’re an Older Employee

Monday, October 12th, 2009

Many retirees often opt to purchase, upgrade, or alter their life insurance policy as they continually age, as making necessary adjustments allows individuals to ensure that their policy meets their desired needs and interests.  Yet, as many older workers opt to continue employment after reaching their intended retirement age, experts have identified key life insurance tips for those who opt to remain in the workforce for a longer duration of time.

While you may have postponed your purchase of a life insurance policy in your younger years, investing in a plan as you near and reach retirement is certainly recommended.  As many life insurance providers may turn down potential clients who are in poor health and / or are of an older age, ensuring that you have optimal coverage can help to protect your loved ones from unanticipated costs in the future.

Benefits for Older Employees

Fortunately, if you’ve decided to continue working beyond your retirement age and you have not yet celebrated your 85th birthday, then your employer is legally required to offer you life insurance protection.  Although your particular life insurance policy may not be as ideal and comprehensive as your younger co-workers, you will still be able to receive coverage at a generally affordable rate.

Finding the Best Policy

If you have reached the retirement age and are unhappy with the life insurance coverage offered by your employer, then you can independently seek out your own coverage from another provider.  To begin, find the best policy for your own lifestyle and needs by evaluating the options of term vs. whole life policies.

Generally, individuals over the age of around 55 should avoid investing in term policies, as term coverage is generally more ideal for a younger individual (such as a newlywed or a new, first time parent).  Since term life insurance is only available for a limited and set period of time, the end-date of coverage means that the policy holder is no longer able to receive any benefits-even though the policy has been paid!  Typically lasting around 10 to 20 years, term policies do not accumulate in value; additionally, older policy applicants often have to undergo a health assessment and / or medical exam before they are approved for coverage.

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Life Insurance Overview: Thinking of Settling Your Life Insurance Policy?

Tuesday, September 15th, 2009

If you’re looking to close out your current life insurance policy, you may be eligible to sell your plan.  Known as life insurance settlement, opting to “settle” one’s insurance policy often allows individuals in specific circumstances to gain greater access to immediate cash resources.

What are Life Settlements?

If opting for a life settlement, then a policy holder must generally be above the age of 65, have a high net worth policy, and / or are experiencing or anticipate an upcoming impaired state of health.  Generally, individuals can settle their life insurance policies by option for coverage plans such as:

  • Term
  • Whole
  • Universal
  • Key man (reserved for businesses)
  • Survivorship
  • Convertible

What is a Viatical Settlement?

For individuals in need of immediate cash assistance amidst a time of serious / potentially deadly illness, opting for a viatical life insurance settlement may be ideal.  Viatical settlements are specifically catered to involve a policy holder with a terminal illness.  Because of the policy holder’s illness, he or she may wish to sell / settle his / her life insurance policy in exchange for immediate compensation and access to funds.  Generally, these funds can be used to allow ill policy holders to pay for medications, medical treatments, or cover other costs.  A viatical life settlement is generally restricted to individuals with a life expectancy of five years or less.

Am I Eligible for a Settlement?

Generally, individuals are eligible to settle / sell their life insurance polices if they meet some or all of the following criteria:

  • At or above the age of 65
  • Life expectancy is a minimum of two years to 18 years (although this may vary depending on the provider’s restrictions)
  • Proof of holding the insurance policy for a minimum number of years

To find out the pros and cons of settling your life insurance policy, speak with a provider’s representative to find out more details.  Also, keep in mind that choosing to settle your policy may result in serious reductions / cancellation penalties; therefore, policy holders generally only opt to settle their life insurance package if in seriously dire circumstances.

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