Archive for the ‘whole life insurance’ tag
Life Insurance For Long And Short Term Planning
Life Insurance as we know it has been around for hundreds of years. As society evolves, so do the many forms of Life Insurance. Today there are various kinds of Life Insurance, from simple Term Insurance, Whole Life, Universal Life, Joint First to Die, Joint Last to Die, Guaranteed to Issue (No Medical), Funeral plans, & the list goes on. People purchase life insurance for many reasons. It is the epitome of an unselfish purchase, because it is one of the few things in life which the purchaser, will never personally use. It is for the beneficiary. People have various types of challenges in their life. When it comes to financial problems, there are both short term and long term problems. This article will discuss the role of Life Insurance and how it can help alleviate both problems.
There are two monumental occurrences in everyone’s life. The day they are born and the day they die. As we go through childhood and grow into adulthood, a person begins to take on various responsibilities in life. They buy their first home, get married, have children, raise a family, perhaps start their own business, whatever it may be, these things impose financial responsibilities. For most people, this is when their financial obligation is the greatest; the first mortgage is usually much greater than the down payment. From the responsibility to provide food and shelter for family to covering a line of credit to start a business, can represent an additional mortgage. Whatever the case may be, a person’s debt is usually greatest when in early adulthood. As people get older, the family grows, and moves on. A mortgage gets paid down and eventually paid off. The business becomes profitable and hopefully pays off its obligations. Individuals make investments in planning for retirement, and ideally, the financial responsibility decreases over time. Retirement on the other hand is another issue.
So, when it comes to financial planning, one of the key components is the proper use of Life Insurance. Life insurance purchased at an early age is really inexpensive. Term Life Insurance, is insurance designed to give you the maximum amount of coverage for the least cost. For example, a 30 year old non smoking male, in average health will pay around $25 per month for $500,000 of coverage for a 10 year term. So, if this individual earning $40,000 per year, had a $200,000 mortgage, and $20,000 of consumer debt, upon his death, his beneficiary would have $280,000 in tax free money. When you break it down, that would buy his spouse, a 7 year readjustment fund of $40,000 per year to draw on. Fairly inexpensive in cost for what the end result could provide. At the end of the original 10 year term, age 40, the coverage would automatically renew for another 10 year period, at a pre-established rate. It could be reduced or discontinued if the person no longer required the coverage. It is used for the so called “short term” challenges.
So, why Universal Life Insurance also? The long term problem everyone faces is final expenses. Let’s face it, we are all going to die one day. How much we have left, or how much we leave behind is unknown until that time comes. So, why place the burden on your family to take care of those obligations? A simple $50,000 Universal Life Insurance permanent plan, would cost approximately the same amount as the Term plan mentioned previously.
Why purchase both plans at a young age? Fairly simple; we tend to be more healthy when we are younger, thus the cost of the insurance is less. So, back to the example of the 30 year old male and the $500,000 of Term Insurance. We all know what will happen at death, but what if he lives longer than the Term Insurance is in force? Probably, over time, the mortgage gets paid off, lines of credit get eliminated, investments are made and the need for temporary or term insurance is no longer valid. The small Universal Life Insurance policy will always be there to take care of final expenses. If a person’s health takes a turn for the worse, as they age, coverage may no longer be available for ongoing permanent needs. The Universal Life Insurance policy also has some provisions built into it, whereby money grows tax free in an investment account and increases the death benefit. Should a financial circumstance require the need for access to money, an individual could withdraw some money from the policy. The option of putting it back, or not, at a later date exists.
Want to find out more about whole life vs term life, then visit our site on how to choose the best whole life insurance calculator for your needs.
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Single Premium Whole Life Pros and Cons
Are you planning for a secure retirement and eventual transfer of your estate? You do not have to be very wealthy to benefit from this. Let us look at one product that is becoming more noticed these days with advisors and people who are making future plans. This is called single premium whole life (SPLI).
SPLI differs from the type of life that you are used to in a couple of ways. The most obvious difference is that you fund it with a large payment at the beginning for the policy. With regular coverage, you make monthly, quarterly, or yearly payments over a period of years.
That money, paid at the start, will guarantee coverage for your whole life. What you have done, really, is to turn a sum of cash into a much larger amount of coverage on you. This is how you can take one amount of money, and turn it into a larger estate to pass on to your beneficiaries.
Consider a retired widow who can live well on her company retirement plan and some savings. Let us say she was a teacher, and she is healthy and plans to tutor in the afternoons to keep herself busy and earn some extra cash too. When her husband died, she got a $30,000 life insurance settlement. Now these amounts will vary, but let us say she could use that money to fund $150,000 in SPLI for her own kids.
The example above is not meant to represent a real situation, but is just to illustrate how this product can be used. Your own numbers will depend upon several different things like your health, age, insurer, etc.
What types of people are happy with a product like SPLI? Well, it seems to work out very well for those with a few thousand dollars that they do not expect to need in the near future. And of course, it is an option for those who would like to take that money and turn it into more money for their estate.
If you do have to cash out your policy early, you could lose some of the value to surrender charges and fees. There is usually some sort of term for these, and policies are different.
Another advantage to the owner is a SPL policy’s ability to grow a cash value quickly. If you can leave the money alone for the few years you will need to get past surrender charges, you can have a nice place to borrow money from. You can also cash the policy in. The cash value should grow quickly since the insurance is already funded by the initial payment!
Accelerated death benefits and nursing home confinement provisions are another feature. In some cases, the insured person can actually use part of the face value while they alive!
But SPLI is not good for everybody. There are some disadvantages to consider. You do need the money to fmake that first, and only, payment. If you do have to surrender early, you risk losing money for fees. The IRS treats these a little differently than regular life policies too. You may not enjoy all of the tax benefits.
We can tell you more. ? Look here to get Single Premium Life Insurance Explained.
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Universal Life Insurance Guide
Universal life insurance is insurance with convenience of i.e. flexible premium, manageable benefit life insurance policy that accumulates account value. Universal life insurance is an improvement over the ordinary form of life insurance in terms of flexibility. The universal life insurance provides you a cash-in-value but you can make timely withdrawal from your gathered fund.
Universal life insurance is popular amongst people for it allows the policyholder to decide the on premium and benefit whereas the other kinds of policies do not let the policyholder to get the benefits from the life insurance fund till the time of death. Buying a universal life insurance can also protect your loved ones against financial problems that may occur after the insurer dies.
The universal life insurance functions like a high interest bank account because the insurance company puts your premium into an account after deducting nominal charges. The amount so accumulated gets an interest that is also added in the account. The interests are adjusted monthly and not annually. With every premium payment made the accumulation of money in the fund augments. Also the compound interest is earned on the account every month. In universal life insurance withdrawals can be made from cash surrender value. Each withdrawal must be at least $500. You are permitted to withdraw four times in a year. The amount that you withdraw is deducted from the Account Value and the death benefit. While you withdraw or surrender from your account value, you might have to pay surrender charges. The cash surrender value is the Account Value minus any surrender charges and any outstanding loans.
In order to have maximum benefit of the policy the policyholder should avoid repeated withdrawals from his accumulated fund. Withdrawal of money time and again will result in fewer benefits at the time of actual need. Moreover there will occur futility in the years of premium payment if the accumulated fund is just a part of the intended original benefit amount to be considered.
However there is a dark side too to universal life insurance. The problem stems due to the interest rate assumption used by carrier proving to be wrong and consequently in the bad performance of the policy. The policy premiums increase if the returns are not earned that often results in inability to payoff and so the cancellation of the policy. For instance numerous universal life insurance policies were surrendered or cancelled from 1970 to 1980.
But over the years the insurance companies have lowered the rates rendering initial assumptions invalid. It then became the choice of the policyholder to make up for the difference through higher premiums. So despite of purchasing a permanent insurance scheme the policyholders are burdened with rising premiums.
So if you want to save the trouble of increasing premiums, buying a whole life insurance policy is the best idea. Universal life insurance is good if you look want to pay less in present moment but keep it in mind that you might have pay more later if the interest rates do not fluctuate as you expected.
Specializes in the senior market with products including Ohio whole life insurance, final expense policies, annuities, and Medicare Supplement insurance.
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Buying Term And Investing The Difference
Some of us has probably heard of the saying “Buy term, invest the difference” when it comes to buying insurance and considering investments. But do we really understand what this means? And if we do understand what this means, why do financial planners recommend that you buy term and invest the difference while your insurance agent is pushing you to buy their recommended product instead.
Most whole life insurance products in the market today are considered rip offs. In fact, these kinds of products have already been considered obsolete in the United States. (Term insurance refers to insurance with life coverage only, whole life on the other hand refers to term policy with an investment component. These kinds of products are usually presented as helping you “force” to save for retirement. The problem with the investment part is that they do not usually give a good rate of return) Sadly these type of products are still sold in the Philippines and people still buy them because of lack of financial literacy.
In order to fully understand this, let me give you an illustration. My mother asked me if she should continue paying an insurance product that she bought for my sister. The insurance product was worth about P 400,000.00 (Philippine Peso) She already paid half of it so the balance left is P 200,000.00.
In order to weigh the pros and cons of the product I asked her to tell me what the benefits were. According to her, the benefits are that after 20 years, my sister (still 18 years old as of this time) will receive P40,000.00 per year until she reach 65. At the age of 65 she can choose to either receive P400,000.00 lump sum or continue receiving P 40,000.00 perpetually. She is also insured for two million pesos.
To evaluate whether or not she should continue paying the P200,000.00 we will evaluate the benefits of the insurance product versus the “Buy term, invest the difference” option.
If you add the total money that my sister will be receiving, she will get a total of P1,520,000.00 at age 65, that is if she opts to get the lump sum at age 65, plus she is insured for two million pesos.
Under the “buy term invest the difference scheme” since she has already paid partially for the insurance product she will convert what she has already paid into “term insurance” (That is if the insurance company allows it) This is usually good for only 20 years. The P 200,000.00 will then be invested at a vehicle of investment that gives about 10 %+ return per annum. The profits derived from the investment will also be re-invested in order to take full advantage of compounded interest. If she faithfully does this until she reaches the age of 65, she will get an estimated P17,639,497.05.
Now do you see the difference? What is P 1,500,000.00 vs. P 17,000,000.00+. Even if you add the insurance coverage that is only a mere P 3,500,000.00, it still cannot compare to the P 17,000,000.00.
You might ask what about insurance protection? Take note that pure term insurance is very cheap. She can just buy term insurance and renew it every 20 years.
The next thing you could probably ask, what investment vehicle would give me 10 % return per annum? Well there is and there are lots of them. You can put it in mutual funds. It does not guarantee a rate of return but historically most mutual fund companies give you more than 10 % return per annum especially if they are invested in equities. Now that the stock market is very bullish returns ranges from 40 % to more than 70 % per annum. You can even directly invest in the stock market. Even the most conservative investors in the stock market earn more than 10 % per annum.
Now you know why buying term and investing the difference does makes sense !!!
Are you willing to learn more about investment strategies ? Visit the blog of Zigfred Diaz where he blogs about several interesting topics such as investments, financial management, business, making financial online and Stock market investing
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Term Life Insurance Advice
Insurance is a complicated field. Any product or commodity can be classified as essential, like food items. There are products that are purchased after seeking expert opinions, such as medicines, for which medical practitioners are consulted. Insurance products belong to this category, as the effect of the decision to buy lasts for a long time. Insurance products require an understanding of various technical terms-an understanding that requires considerable time and effort.
The traditional distribution channels for insurance products are career life agents who represent a single insurance company and independent agents who represent many companies. Currently, the innovative additions to the channel are the use of mail, phone and the Internet. Insurance products are also sold through banks and stockbrokers.
The main channel for distribution is through agents. According to the LIMRA estimate, 90% of the life insurance products are sold by agents. An agent is an authorized representative of an insurance company who sells and services insurance contracts. Similarly, there are brokers, whose job is similar to that of agents, except that they represent the party seeking insurance. Agents are licensed by states to sell insurance products.
The role of an agent is both an advisor and a seller. As agents function as salespersons, before purchasing a policy, it is important to seek an agent who can offer comprehensive advice rather than simply a desire to sell. According to the 10 rules to be followed by the buyers of policies developed by the American Council of Life Insurance, rule number three states to select a competent, knowledgeable and trustworthy agent. There are laws that limit the power and penalize the agent for misconduct.
Informal advice can also be sought through the Internet through blog sites and other dedicated sites for insurance products. But before seeking advice, one should know what specifically he is seeking. One should prepare to ask intelligent questions that would lead to answers that form the basis for decisions.
Life Insurance Michigan protects your family from financial loss in the event of your death
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Selecting The Best Whole Life Insurance Policies
For many people, whole life insurance policies will be the main thing that they are looking online for when they are shopping for a whole life insurance quote and that is especially true when they are shopping for an whole life insurance policies. This is because there is so much information that has to be taken in that it can be a little overwhelming at times.
Going online to look at all of the different companies whole life policies will be easy to do. You can do it in your own time and you will be able to look through and compare (one against the other) instantly. You should also be able to compare the monthly premium of each one so that you can get a realistic picture of what is on offer.
Within a few quick minutes on the web you will find yourself face to face with all kinds of different companies offering online whole life insurance policies. Not only will you be able to looking at all of the facts and the details much easier when looking at online whole life insurance policies, you will also be able to look at more companies then you would if you were just calling around to local companies around you.
If you think about it, you will find a much better deal with an online whole life insurance policies because you are able to look at companies from all over the country. Limiting yourself to just the few places in your small town will also limit your options.
Selecting The Best Of The Best - When it comes to whole life insurance policies shopping you will want to make sure that you are looking around until you find the very best deal. While it is tempting to go with the first whole life insurance policies you come across because of the convenience, you could actually be costing yourself thousands of dollars in the long run.
You should also take that little bit of extra time to make sure that you put your best effort into finding the whole life policy that you want and not the first that you come to.
After you have collected all of the information, you will want to make sure that you are evaluating the companies correctly - having a pros and cons list will help you quickly evaluate one company from another. The two key areas of the whole life policy that you want to take serious note of are the benefits that you will receive and the premium that you will have to pay. These two will be the most important when you decide to buy whole life insurance.
Once you have the actual information written down in front of you, it will be a lot easier to see when you are aiming to choose the right insurance policy for you. There is also little sense in wasting some of your monthly paycheck on the policy if it isn’t going to act as you want it to - making sure that your loves ones are financially protected and if you do die that they will be able to pay for things when you are gone.
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