Buildings and contents insurance
Buildings and contents insurance will vary based on the type of property, its size, location and the property value. Wherever you live, it is always a good idea to have adequate insurance for your property and all its contents in case of emergencies. It is a common arrangement for mortgage companies to offer homeowners insurance with the mortgage, if you have one. Tenants tend to have buildings insurance arranged by or through the landlord, but still need to insure their own contents.
Therefore, it抯 worth remembering that you can buy buildings and contents insurance combined, or separately. Unless you are tied to your mortgage company to use their insurance company or policy, shopping around for the best deal is a sensible idea, as is a combined policy as this will usually be cheaper.
When insuring your home for buildings and contents insurance, many people are unsure as to how much to insure, and unfortunately, many people are underinsured. For the buildings element, the amount shown on the valuation report of property is the amount that needs to be covered. Many valuations will state the value of the property for rebuilding purposes ?this is the figure you need. If you don抰 have a valuation, you could always ask for one from a local estate agent by telling them you are thinking of selling. The main point is that if damage occurs and your home needs to be rebuilt, the insurance money should cover all work to completely rebuild the property.
Cover for the contents of your home is called contents cover. Special high value items may need to be listed separately, so check before accepting the policy, as it is exactly these items that are most valuable and therefore will be most costly to replace. Jewellery, bicycles and expensive electronics such as laptops etc are typical extra items not covered unless specified. Many homeowners give an estimated total amount to the insurance company for contents and ignore these major items, and can be underinsured as a result.
Buildings and contents insurance can come with 揂ccidental Damage and All Risks? These items can be added to your policy at an extra cost but they may be worth it. All risks means that any items regularly taken out of the home can be covered, regardless of where and how they are damaged. This might even cover damage from pets or children ?it抯 basically designed to cover high risk. But remember that anything extra added to the policy will raise your premium.
Apr 30, 2007
Pension Term Insurance
Pension term insurance
Pension Term Insurance is a type of insurance policy which uses your pension contribution allowance to save you money if you are a tax payer. This new type of insurance came into effect on 6 April 2006, when the Government allowed tax relief to be claimed on the term insurance premiums at the highest tax rate you pay - by linking the insurance policy to your pension allowance.
Pension term insurance works like this: assuming you are eligible to contribute to a stakeholder or personal pension ?and regardless of whether you actually do contribute or not - you can take out this type of life insurance policy. The Government has set new limits for how much you can place in a pension of?15,000 per year or ?.5 Million per lifetime.
You can use part of your annual limit to pay for life insurance instead of a pension, by taking out cover that counts towards your limit. So you could take out ?50,000 of pension term insurance and then you would only be able to place ?.25 into your pension. The result is you get to claim tax relief on your life insurance premiums ?which will be 22% for basic-rate taxpayers or 40% for higher rate taxpayers. You can use the allowance whether you抮e actually making pensions contributions or not.
There are a few limitations to pensions term insurance. You can only insure yourself, not yourself plus partner on one policy, and the underlying costs of cover will be slightly higher, but certainly less than the savings you are likely to make. Plus policy premiums are only automatically reduced by 22%, so higher rate tax payers need to claim the additional saving on their tax return.
Also, you cannot convert an existing policy into a pension term insurance policy, and cancelling an old policy and setting up a new one might cost more than you will save.
Because pension term insurance is a form of term life insurance, this means that the payments and cover will stay the same throughout the term of the policy. Plus the policy will be in effect for a set term or period of time, and will expire after this, and you will effectively lose your premiums paid if you have not made a claim.
Pension Term Insurance is a type of insurance policy which uses your pension contribution allowance to save you money if you are a tax payer. This new type of insurance came into effect on 6 April 2006, when the Government allowed tax relief to be claimed on the term insurance premiums at the highest tax rate you pay - by linking the insurance policy to your pension allowance.
Pension term insurance works like this: assuming you are eligible to contribute to a stakeholder or personal pension ?and regardless of whether you actually do contribute or not - you can take out this type of life insurance policy. The Government has set new limits for how much you can place in a pension of?15,000 per year or ?.5 Million per lifetime.
You can use part of your annual limit to pay for life insurance instead of a pension, by taking out cover that counts towards your limit. So you could take out ?50,000 of pension term insurance and then you would only be able to place ?.25 into your pension. The result is you get to claim tax relief on your life insurance premiums ?which will be 22% for basic-rate taxpayers or 40% for higher rate taxpayers. You can use the allowance whether you抮e actually making pensions contributions or not.
There are a few limitations to pensions term insurance. You can only insure yourself, not yourself plus partner on one policy, and the underlying costs of cover will be slightly higher, but certainly less than the savings you are likely to make. Plus policy premiums are only automatically reduced by 22%, so higher rate tax payers need to claim the additional saving on their tax return.
Also, you cannot convert an existing policy into a pension term insurance policy, and cancelling an old policy and setting up a new one might cost more than you will save.
Because pension term insurance is a form of term life insurance, this means that the payments and cover will stay the same throughout the term of the policy. Plus the policy will be in effect for a set term or period of time, and will expire after this, and you will effectively lose your premiums paid if you have not made a claim.
Inheritance Tax Planning
As more and more people own their home, and house prices continue to rise, the number of people affected by Inheritance Tax continues to rise. At the moment Inheritance Tax (IHT) is only payable if the value of the deceased's estate is more than £275,000. The Inheritance Tax rate is currently 40%. The £275,000 threshold can quickly be breached after including the value of your property, possessions and investments.
If the estate (regardless of value) passes simply to your spouse or civil partner (even if seperated, though not divorced or if your civil partnership is dissolved) while you both have permanent homes in the United Kingdom then there is not Inheritance Tax liability. Well known other exemptions are gifts or transfers made more than seven years before death and some other gifts e.g. wedding presents and gifts to charity, political parties and some museums and universities.
Your personal representative or the estate's executor or administrator is liable for paying the inheritance tax due within six months of the date of your death, failing which interest will be charged on the liability.
If your estate is liable to exceed the Inheritance Tax threshold there are options open to you to manage your estate's inheritance tax liability. IHT Planning will likely make use of different kinds of trusts and early transfers of property and assets to take advantage of the seven year rule. Efficient use of your allowances will enable you to ensure that as much of your estate as possible is directed into the hands of those you choose avoiding inheritance tax liability where possible and legal.
Inheritance planning is a complex area of taxation law and the use of a professional inheritance tax adviser is advised. You should ensure that you have a will and that it is kept up to date reflecting your directions for the distribution of your assets. Making a will is an integral part of inheritance planning and specialist advice is recommended, especially if your estate is large.
If the estate (regardless of value) passes simply to your spouse or civil partner (even if seperated, though not divorced or if your civil partnership is dissolved) while you both have permanent homes in the United Kingdom then there is not Inheritance Tax liability. Well known other exemptions are gifts or transfers made more than seven years before death and some other gifts e.g. wedding presents and gifts to charity, political parties and some museums and universities.
Your personal representative or the estate's executor or administrator is liable for paying the inheritance tax due within six months of the date of your death, failing which interest will be charged on the liability.
If your estate is liable to exceed the Inheritance Tax threshold there are options open to you to manage your estate's inheritance tax liability. IHT Planning will likely make use of different kinds of trusts and early transfers of property and assets to take advantage of the seven year rule. Efficient use of your allowances will enable you to ensure that as much of your estate as possible is directed into the hands of those you choose avoiding inheritance tax liability where possible and legal.
Inheritance planning is a complex area of taxation law and the use of a professional inheritance tax adviser is advised. You should ensure that you have a will and that it is kept up to date reflecting your directions for the distribution of your assets. Making a will is an integral part of inheritance planning and specialist advice is recommended, especially if your estate is large.
Inheritance Tax Planning
As more and more people own their home, and house prices continue to rise, the number of people affected by Inheritance Tax continues to rise. At the moment Inheritance Tax (IHT) is only payable if the value of the deceased's estate is more than £275,000. The Inheritance Tax rate is currently 40%. The £275,000 threshold can quickly be breached after including the value of your property, possessions and investments.
If the estate (regardless of value) passes simply to your spouse or civil partner (even if seperated, though not divorced or if your civil partnership is dissolved) while you both have permanent homes in the United Kingdom then there is not Inheritance Tax liability. Well known other exemptions are gifts or transfers made more than seven years before death and some other gifts e.g. wedding presents and gifts to charity, political parties and some museums and universities.
Your personal representative or the estate's executor or administrator is liable for paying the inheritance tax due within six months of the date of your death, failing which interest will be charged on the liability.
If your estate is liable to exceed the Inheritance Tax threshold there are options open to you to manage your estate's inheritance tax liability. IHT Planning will likely make use of different kinds of trusts and early transfers of property and assets to take advantage of the seven year rule. Efficient use of your allowances will enable you to ensure that as much of your estate as possible is directed into the hands of those you choose avoiding inheritance tax liability where possible and legal.
Inheritance planning is a complex area of taxation law and the use of a professional inheritance tax adviser is advised. You should ensure that you have a will and that it is kept up to date reflecting your directions for the distribution of your assets. Making a will is an integral part of inheritance planning and specialist advice is recommended, especially if your estate is large.
If the estate (regardless of value) passes simply to your spouse or civil partner (even if seperated, though not divorced or if your civil partnership is dissolved) while you both have permanent homes in the United Kingdom then there is not Inheritance Tax liability. Well known other exemptions are gifts or transfers made more than seven years before death and some other gifts e.g. wedding presents and gifts to charity, political parties and some museums and universities.
Your personal representative or the estate's executor or administrator is liable for paying the inheritance tax due within six months of the date of your death, failing which interest will be charged on the liability.
If your estate is liable to exceed the Inheritance Tax threshold there are options open to you to manage your estate's inheritance tax liability. IHT Planning will likely make use of different kinds of trusts and early transfers of property and assets to take advantage of the seven year rule. Efficient use of your allowances will enable you to ensure that as much of your estate as possible is directed into the hands of those you choose avoiding inheritance tax liability where possible and legal.
Inheritance planning is a complex area of taxation law and the use of a professional inheritance tax adviser is advised. You should ensure that you have a will and that it is kept up to date reflecting your directions for the distribution of your assets. Making a will is an integral part of inheritance planning and specialist advice is recommended, especially if your estate is large.
Unsecured Loans in the UK
Unlike a secured loan, an unsecured loan does not require you to have property to use as collateral for the loan. This type of loan is not secured against your assets, it is therefore more of a risk for the lending institution and more stringent criteria are used to assess applications. It is important that the lender can see evidence of a good credit history and earnings sufficient to meet regular loan repayments.
Lenders include high street banks and building societies but you may find that specialist lenders are able to offer a loan to you where the high street branches are unable to due to their less restrictive criteria or through their specialism in a particular type of borrower, e.g. the self employed, company directors, tenants, students or people with mortgage arrears, an adverse credit history and County Court Judgements (CCJ's).
Without onerous requirements for arranging security an unsecured loan is relatively quick to arrange and funds can be made available often within 24 or 48 hours of being accepted by the lender. The terms of the loan will reflect the risk profile of unsecured loans however and characteristically will allow lesser amounts to be borrowed and a higher rate of interest. An unsecured loan will usually have a fixed term and a fixed interest rate and is generally repaid monthly. Some lenders allow payment holidays and some will allow penalty free early repayment. Remember to shop around for the best unsecured loan deal.
An unsecured loan is therefore suitable for those looking to borrow up to around ?5,000 and who have a good credit history and obvious ability to make repayments. As the size of the loan is generally smaller than that of a secured loan the term of the loan will often be shorter, usually up to 5 or 10 years.
While security over your home is not required lenders often prefer homeowners to other borrowers. It may seem that an unsecured loan is less risky to the borrower as the loan is not secured against their house. In reality you should, as with any loan, be vigilant to meet your payment obligations because court proceedings used to recover outstanding balances will inevitably take your assets into account.
An unsecured loan can be used for a variety of purposes including for example buying a car, going on a holiday, home improvements or debt management and consolidation.
Lenders include high street banks and building societies but you may find that specialist lenders are able to offer a loan to you where the high street branches are unable to due to their less restrictive criteria or through their specialism in a particular type of borrower, e.g. the self employed, company directors, tenants, students or people with mortgage arrears, an adverse credit history and County Court Judgements (CCJ's).
Without onerous requirements for arranging security an unsecured loan is relatively quick to arrange and funds can be made available often within 24 or 48 hours of being accepted by the lender. The terms of the loan will reflect the risk profile of unsecured loans however and characteristically will allow lesser amounts to be borrowed and a higher rate of interest. An unsecured loan will usually have a fixed term and a fixed interest rate and is generally repaid monthly. Some lenders allow payment holidays and some will allow penalty free early repayment. Remember to shop around for the best unsecured loan deal.
An unsecured loan is therefore suitable for those looking to borrow up to around ?5,000 and who have a good credit history and obvious ability to make repayments. As the size of the loan is generally smaller than that of a secured loan the term of the loan will often be shorter, usually up to 5 or 10 years.
While security over your home is not required lenders often prefer homeowners to other borrowers. It may seem that an unsecured loan is less risky to the borrower as the loan is not secured against their house. In reality you should, as with any loan, be vigilant to meet your payment obligations because court proceedings used to recover outstanding balances will inevitably take your assets into account.
An unsecured loan can be used for a variety of purposes including for example buying a car, going on a holiday, home improvements or debt management and consolidation.
Secured Loans in the UK
It is often essential to raise finance for major purchases including for example house related investments such as adding a conservatory or a loft extension. One method for raising this finance is to borrow money with security put down against the loan. This effectively guarantees the loan by assigning rights to the security in the event of a loan default. Such a loan backed by collateral is usually called a secured loan.
One of the most frequently used assets as security in such an arrangement is a house, or that portion of the equity in a house which is not already granted as security for other loans. This type of loan is usually quicker to arrange and more attractive interest rates are available as it is a safer proposition for the lender. In nearly all circumstances the lender will be able to recover their money. Because of the lesser risk profile of the secured loan it will often be attractive to those with a less than perfect credit history.
The secured loan is therefore an option for those with equity tied up in property who are seeking low interest rates or have experienced problems getting an unsecured loan, or for whom an unsecured loan is not otherwise an option.
Secured loans can usually be arranged without punitive fees like those which a standard remortgage will attract. For this reason it is often a preferred route for those seeking to release capital from their real estate investments.
The capital which a secured loan releases can usually be used for any purpose including home improvements, buying a car, take a once in a lifetime holiday, and management or consolidation of other debts. By consolidating many short term debts into one larger long term secured loan the monthly payments to service the debt can be substantially reduced making a significant difference to the month to month finances of the debtor.
Secured Loans are available from high street banks and building societies as well as specialist lenders.
One of the most frequently used assets as security in such an arrangement is a house, or that portion of the equity in a house which is not already granted as security for other loans. This type of loan is usually quicker to arrange and more attractive interest rates are available as it is a safer proposition for the lender. In nearly all circumstances the lender will be able to recover their money. Because of the lesser risk profile of the secured loan it will often be attractive to those with a less than perfect credit history.
The secured loan is therefore an option for those with equity tied up in property who are seeking low interest rates or have experienced problems getting an unsecured loan, or for whom an unsecured loan is not otherwise an option.
Secured loans can usually be arranged without punitive fees like those which a standard remortgage will attract. For this reason it is often a preferred route for those seeking to release capital from their real estate investments.
The capital which a secured loan releases can usually be used for any purpose including home improvements, buying a car, take a once in a lifetime holiday, and management or consolidation of other debts. By consolidating many short term debts into one larger long term secured loan the monthly payments to service the debt can be substantially reduced making a significant difference to the month to month finances of the debtor.
Secured Loans are available from high street banks and building societies as well as specialist lenders.
Getting a Mortgage in the UK
A mortgage is a loan taken out to pay for the purchase of property, usually a house. Due to the size of the loan the lender will usually take security to cover themselves in the event of non payment of mortgage installments; usually they will hold the deeds of the house for this purpose. Mortgages in the UK are usually taken out over 25 years, although with rising house prices pricing first time buyers out of the market this term is often exceeded to 30 or 40 years.
The most important thing to consider when seeking the best mortgage deals for buying a new house is how much you can afford to pay on a monthly basis. Take into account contingencies, what would happen if mortgage interests rates rise to 10% or 15%, what would happen if you lose your job or are incapable of working? Consider the advantages and disadvantages of going for a fixed rate loan over a long period rather than a variable rate loan which follows interest rate fluctuations. Remember to factor in any relevant insurances to cover against eventualities.
Once you know how much you can afford you can begin to look at properties which fit in your price range, and you can get agreement in principle from your mortgage lender of choice that you will get a mortgage.
You have a wide choice of lenders available from high street banks and building societies to specialist mortgage lenders who cater to the self-employed, those with bad credit histories or other niche groups. These higher risk categories will be penalised with higher rates of interest on their mortgage. In some circumstances, individuals may not be able to find a lender willing to lend to them ?or a lender may only be prepared to lend a certain percentage of the required amount.
Mortgage brokers are well equipped to find mortgages which are tailored to many different situations, if your situation is 'non-standard' you should consider using a broker.
While mortgages for 100% of the value of a home are available, lenders usually prefer to give a lesser percentage and reward buyers who contribute cash by giving them a lower interest rate for the best mortgage deals.
The most important thing to consider when seeking the best mortgage deals for buying a new house is how much you can afford to pay on a monthly basis. Take into account contingencies, what would happen if mortgage interests rates rise to 10% or 15%, what would happen if you lose your job or are incapable of working? Consider the advantages and disadvantages of going for a fixed rate loan over a long period rather than a variable rate loan which follows interest rate fluctuations. Remember to factor in any relevant insurances to cover against eventualities.
Once you know how much you can afford you can begin to look at properties which fit in your price range, and you can get agreement in principle from your mortgage lender of choice that you will get a mortgage.
You have a wide choice of lenders available from high street banks and building societies to specialist mortgage lenders who cater to the self-employed, those with bad credit histories or other niche groups. These higher risk categories will be penalised with higher rates of interest on their mortgage. In some circumstances, individuals may not be able to find a lender willing to lend to them ?or a lender may only be prepared to lend a certain percentage of the required amount.
Mortgage brokers are well equipped to find mortgages which are tailored to many different situations, if your situation is 'non-standard' you should consider using a broker.
While mortgages for 100% of the value of a home are available, lenders usually prefer to give a lesser percentage and reward buyers who contribute cash by giving them a lower interest rate for the best mortgage deals.
Buy to let Mortgages in the UK
Buy to Let Mortgages are mortgages specifically designed for people who want to invest in the property market by purchasing one or more houses and letting them out to tenants. The Owner is then able to benefit from any appreciation in the capital value of the house itself. They are also likely to be able to maintain the property and meet much of the loan repayment from the revenue realised by letting. The buy to let phenomenon has driven house prices higher over the last few years while making a broader section of rental accommodation available.
Buy to Let Mortgages differ from what came before by specifically allowing the rental revenue to be considered as income when considering the ability of the buyer to meet the ongoing mortgage payments. Buy to Let mortgages are very similar to standard mortgages for property which the owner will inhabit. The percentage which the buy to let lender is willing to lend is likely to be restricted to 80% of the value of a property. The term of a buy-to-let mortgage is likely to be somewhere in the region of 5 to 45 years. Interest rates are also likely to be slightly higher than those which a standard mortgage agreement attracts.
When buying to let it is important to know the market in which you will be trying to let your property. It may be worth getting help from a letting agent who knows the area, what is in demand, what the likely pitfalls will be. By planning carefully and purchasing wisely you ought to get a property which requires little maintenance and is attractive to tenants. Avoiding void periods, i.e. time between tenants where you receive no rental income, will be your primary concern once you have purchased the house on a buy to let basis. While not inescapable, you are wise to do everything you can in advance to minimise the likely length of these periods. Insurance is now available to cover buy to let contingencies, your provider ought to be able to provide you with information.
Many high street banks and building societies now offer a buy to let mortgage product. Independent mortgage broker will also be able to recommend mortgage arrangements which are not available on the high street and which will more perfectly meet your buy-to-let mortgage requirements.
Buy to Let Mortgages differ from what came before by specifically allowing the rental revenue to be considered as income when considering the ability of the buyer to meet the ongoing mortgage payments. Buy to Let mortgages are very similar to standard mortgages for property which the owner will inhabit. The percentage which the buy to let lender is willing to lend is likely to be restricted to 80% of the value of a property. The term of a buy-to-let mortgage is likely to be somewhere in the region of 5 to 45 years. Interest rates are also likely to be slightly higher than those which a standard mortgage agreement attracts.
When buying to let it is important to know the market in which you will be trying to let your property. It may be worth getting help from a letting agent who knows the area, what is in demand, what the likely pitfalls will be. By planning carefully and purchasing wisely you ought to get a property which requires little maintenance and is attractive to tenants. Avoiding void periods, i.e. time between tenants where you receive no rental income, will be your primary concern once you have purchased the house on a buy to let basis. While not inescapable, you are wise to do everything you can in advance to minimise the likely length of these periods. Insurance is now available to cover buy to let contingencies, your provider ought to be able to provide you with information.
Many high street banks and building societies now offer a buy to let mortgage product. Independent mortgage broker will also be able to recommend mortgage arrangements which are not available on the high street and which will more perfectly meet your buy-to-let mortgage requirements.
Apr 27, 2007
Critical Illness Insurance
There are always exclusions however and it is likely that if your critical or serious illness is caused by amongst other things aviation, criminal acts, a failure to follow medical advice, hazardous sports or pastimes, or war you will not be entitled to receive a payment. Always read the policy carefully so that you can know whether the policy is acceptable to you.
You can take advice on Critical Illness Insurance from an Independent Financial Adviser or Insurance Broker who deals regularly in Critical Illness policies, or by deciding on your requirements and researching in detail appropriate critical illness insurance policies on the web4
You can take advice on Critical Illness Insurance from an Independent Financial Adviser or Insurance Broker who deals regularly in Critical Illness policies, or by deciding on your requirements and researching in detail appropriate critical illness insurance policies on the web4
Critical Illness Insurance
CI insurance payments are made by premium either monthly or annually and the premium which you can afford will dictate the level of benefit you will receive should you succumb to a covered illness. The premium is also influenced by your general health at the time of taking out the policy as well as factors such as whether you smoke. You are unlikely to be able to get cover for an illness which you have suffered since birth, and you will find premiums are higher if you have a history of particular illnesses in your family. 3
Critical Illness Insurance
When thinking about arranging critical illness insurance cover, you should try to estimate what your loss of income will be and what money you will need to compensate for the earning power which the illness deprives you of. It may be worth investigating roughly how much it would cost to make alterations to your home to accommodate you should you be unable for example to use stairs. Sufficient benefit to pay off the balance of your mortgage would provide enormous peace of mind should you become unable to earn and therefore continue to make mortgage repayments. Many advisers recommend setting your covered amount at three to four times your annual salary.2
Critical Illness Insurance
Critical Illness (CI) Insurance is designed to pay out a lump sum benefit, free of income tax and capital gains tax, in the event that you are diagnosed with a serious or critical illness as defined by the insurance provider. The common critical illnesses covered include cancer, multiple sclerosis, kidney failure, stroke and heart attack. Each policy is designed for particular illnesses and you should carefully examine the policy wording before committing to one policy. Many term life insurance policies have a critical illness insurance option which you can additionally subscribe to.-1
Home Insurance in the UK
After the sizable investment you have made in buying your home, furnishing and decorating it, you can insure yourself against risks with a home insurance policy. Generally these policies are broken down into two major components; buildings insurance and home contents insurance. The buildings insurance covers your home's bricks and mortar, that is the home itself. Home contents insurance covers most other things contained within your home.
If your property is used as security for a loan (a mortgage or another secured loan) then it will likely be a requirement that you arrange and maintain suitable insurance cover for the building for the term which the loan covers. This requirement ensures that should something untoward happen to your home, for example a fire or a flood, the value of your property (and your lender's investment) is not adversely effected.
Contents insurance covers your possessions inside your home, for example furnishings. Cover is provided either on a 'like for like' or a 'new for old' basis. A like for like basis will provide you with monetary compensation equivalent to the value of your insured item just before it was damaged whereas new for old will provide you with monetary compensation which would allow you to replace the damaged item with an equivalent new item.
You should read the small print of your policy carefully to check whether it covers related items, commonly included items will be garage or outbuildings contents, personal money, garden contents, food in the deep freezer, loss of fuel or water. If you have any items of particular importance you may want to ensure that they are covered by your combined standard house insurance policy or arrange additional insurance. The type of valuable item commonly held in homes would be jewellery including engagement or wedding rings.
It is worth shopping around for cheap home insurance quotes. Often specialist insurers are able to offer better cover or cheaper premiums than that provided by the banks and building societies as 'default' options attached to mortgages.
Insurance premiums are influenced by the area in which you live, low local crime rates will be reflected in your premium. Insurers often provide a no claims bonus of up to 50% for those who have not made claims against their policy over the last few years.
Cheap home insurance quotes arrangements are available for students, who may or may not be covered by their parents house insurance policy while away at University or College. These often focus on possessions which students are likely to have, e.g. Computers or bikes.
If your property is used as security for a loan (a mortgage or another secured loan) then it will likely be a requirement that you arrange and maintain suitable insurance cover for the building for the term which the loan covers. This requirement ensures that should something untoward happen to your home, for example a fire or a flood, the value of your property (and your lender's investment) is not adversely effected.
Contents insurance covers your possessions inside your home, for example furnishings. Cover is provided either on a 'like for like' or a 'new for old' basis. A like for like basis will provide you with monetary compensation equivalent to the value of your insured item just before it was damaged whereas new for old will provide you with monetary compensation which would allow you to replace the damaged item with an equivalent new item.
You should read the small print of your policy carefully to check whether it covers related items, commonly included items will be garage or outbuildings contents, personal money, garden contents, food in the deep freezer, loss of fuel or water. If you have any items of particular importance you may want to ensure that they are covered by your combined standard house insurance policy or arrange additional insurance. The type of valuable item commonly held in homes would be jewellery including engagement or wedding rings.
It is worth shopping around for cheap home insurance quotes. Often specialist insurers are able to offer better cover or cheaper premiums than that provided by the banks and building societies as 'default' options attached to mortgages.
Insurance premiums are influenced by the area in which you live, low local crime rates will be reflected in your premium. Insurers often provide a no claims bonus of up to 50% for those who have not made claims against their policy over the last few years.
Cheap home insurance quotes arrangements are available for students, who may or may not be covered by their parents house insurance policy while away at University or College. These often focus on possessions which students are likely to have, e.g. Computers or bikes.
Apr 25, 2007
How can I locate a lost life insurance policy?
If a family member dies and you are unable to locate his or her life insurance policies, there is, unfortunately, no national or statewide database of all life insurance policies that you can consult. However, you can try to determine:
which insurance company might have issued the policy
which agent or broker might have sold or serviced the policy
whether the deceased might have had insurance through an employer, union or trade association, or other group to which he/she belonged.Here are some strategies that might turn up useful information:
Look for insurance-related documents.Search through files, bank safe deposit boxes, and other storage places to see if there are any insurance-related documents. Also, look through address books to see if the names of any insurance agents or companies are listed. An agent or company who sold the deceased their auto or home insurance may know about the existence of a life insurance policy.
Contact current and prior financial advisors.Contact current or prior attorneys, accountants, investment advisors, bankers, business insurance agents/brokers and others who might have known about the deceased’s life insurance.
Review life insurance applications.The application for each policy is attached to that policy. So if you can find any of the deceased’s life insurance policies, look at the applications for them. The application will have a list of all other life insurance policies owned at the time of the application.
Contact previous employers.Former employers may have a record of a past group policy or policies.
Check bank books and canceled checks.See if any checks have been made out to life insurance companies over the years.
Check the mail for a year following the death of the policyholder.Look for premium notices or dividend notices. If a policy has been paid up, there will no notice of premium payments due. However, the company may still send an annual notice regarding the status of the policy or it may pay or send notice of a dividend.
Review the deceased’s income tax returns for the past two years.Look for interest income from and interest expenses paid to life insurance companies. Life insurance companies pay interest on accumulations on permanent policies and charge interest on policy loans.
Contact all relevant state insurance departments.The National Association of Insurance Commissioners has a “Life Insurance Company Location System” to help you find state insurance department personnel who might help identify companies that might have written life insurance on the deceased. To access that service, click here.
Check with the state's unclaimed property office.If a life insurance company knows that an insured client has died but can’t find the beneficiary, it must turn the death benefit over to the state in which the policy was bought as “unclaimed property.” If you know (or can guess) where the policy was bought, you can contact the state comptroller’s department to see if it has any unclaimed money from life insurance policies belonging to the deceased.
Contact a private service that will search for “lost life insurance.”Several private companies will, for a fee, contact insurance companies for you to find out if the deceased was insured. This service is often provided through their Web sites.
Do you think the life insurance might have been bought in Canada? If so, you might contact the Canadian Life and Health Insurance Association (phone: 1-800-268-8099; Web site: www.clhia.ca).
Try the MIB database.There is a database of all applications for individual life insurance that were processed during the last 12 years. There is a $75 charge per search. Many searches are not successful: a random sample of searches found only 1 match in every 4 tries. For information, click here.
which insurance company might have issued the policy
which agent or broker might have sold or serviced the policy
whether the deceased might have had insurance through an employer, union or trade association, or other group to which he/she belonged.Here are some strategies that might turn up useful information:
Look for insurance-related documents.Search through files, bank safe deposit boxes, and other storage places to see if there are any insurance-related documents. Also, look through address books to see if the names of any insurance agents or companies are listed. An agent or company who sold the deceased their auto or home insurance may know about the existence of a life insurance policy.
Contact current and prior financial advisors.Contact current or prior attorneys, accountants, investment advisors, bankers, business insurance agents/brokers and others who might have known about the deceased’s life insurance.
Review life insurance applications.The application for each policy is attached to that policy. So if you can find any of the deceased’s life insurance policies, look at the applications for them. The application will have a list of all other life insurance policies owned at the time of the application.
Contact previous employers.Former employers may have a record of a past group policy or policies.
Check bank books and canceled checks.See if any checks have been made out to life insurance companies over the years.
Check the mail for a year following the death of the policyholder.Look for premium notices or dividend notices. If a policy has been paid up, there will no notice of premium payments due. However, the company may still send an annual notice regarding the status of the policy or it may pay or send notice of a dividend.
Review the deceased’s income tax returns for the past two years.Look for interest income from and interest expenses paid to life insurance companies. Life insurance companies pay interest on accumulations on permanent policies and charge interest on policy loans.
Contact all relevant state insurance departments.The National Association of Insurance Commissioners has a “Life Insurance Company Location System” to help you find state insurance department personnel who might help identify companies that might have written life insurance on the deceased. To access that service, click here.
Check with the state's unclaimed property office.If a life insurance company knows that an insured client has died but can’t find the beneficiary, it must turn the death benefit over to the state in which the policy was bought as “unclaimed property.” If you know (or can guess) where the policy was bought, you can contact the state comptroller’s department to see if it has any unclaimed money from life insurance policies belonging to the deceased.
Contact a private service that will search for “lost life insurance.”Several private companies will, for a fee, contact insurance companies for you to find out if the deceased was insured. This service is often provided through their Web sites.
Do you think the life insurance might have been bought in Canada? If so, you might contact the Canadian Life and Health Insurance Association (phone: 1-800-268-8099; Web site: www.clhia.ca).
Try the MIB database.There is a database of all applications for individual life insurance that were processed during the last 12 years. There is a $75 charge per search. Many searches are not successful: a random sample of searches found only 1 match in every 4 tries. For information, click here.
How do I file a life insurance claim?
To begin the claims process:
Get several copies of the death certificate.
Call your insurance agent. He or she can help you fill out the necessary forms and act as an intermediary with the insurance company. (Don’t keep life insurance policies in your safe deposit box. In most states, safe deposit boxes are sealed temporarily upon the death of the owner, which can delay the settlement. ) If you don’t have an insurance agent, or don’t know who the deceased's agent was, contact the company directly.
Submit a certified copy of the death certificate from the funeral director with the policy claim. Once the claim is submitted, a settlement should be issued to you shortly. Once a life insurance claim is submitted, you must determine how the proceeds will be distributed. These are some of the options available:
Lump sum -- You receive the entire death benefit in a single amount.
Specific income provision -- The company pays you both principal and interest on a predetermined schedule.
Life income option -- You receive a guaranteed income for life. The amount of income depends on the death benefit, your gender and your age at the time of the insured's death.
Interest income option -- The company holds the proceeds and pays you interest on them. The death benefit remains intact and goes to a secondary beneficiary upon your death.
Get several copies of the death certificate.
Call your insurance agent. He or she can help you fill out the necessary forms and act as an intermediary with the insurance company. (Don’t keep life insurance policies in your safe deposit box. In most states, safe deposit boxes are sealed temporarily upon the death of the owner, which can delay the settlement. ) If you don’t have an insurance agent, or don’t know who the deceased's agent was, contact the company directly.
Submit a certified copy of the death certificate from the funeral director with the policy claim. Once the claim is submitted, a settlement should be issued to you shortly. Once a life insurance claim is submitted, you must determine how the proceeds will be distributed. These are some of the options available:
Lump sum -- You receive the entire death benefit in a single amount.
Specific income provision -- The company pays you both principal and interest on a predetermined schedule.
Life income option -- You receive a guaranteed income for life. The amount of income depends on the death benefit, your gender and your age at the time of the insured's death.
Interest income option -- The company holds the proceeds and pays you interest on them. The death benefit remains intact and goes to a secondary beneficiary upon your death.
If I can’t pay my premium, what should I do?
If unexpected expenses come up and you can’t pay your life insurance premium, you should know the possible consequences. The effect depends on the type of policy and coverage you have and the policy terms and conditions.Term: If you stop paying premiums, your coverage lapses.Permanent: If you have this type of policy, you will have the following choices:
Cash out the policy.This means that you can stop paying the premium and collect the available cash savings. You will no longer be covered by life insurance, but you will at least save some of the proceeds of the policy. You may, however, have to pay taxes on some of the cash value if the sum exceeds what you have paid in premiums.
Non-forfeiture optionsThere may be a “reduced paid-up” option. This means that you can stop paying premiums completely in return for a reduced death benefit and no cash saving. You may also be able to convert the permanent policy to an extended term policy for a time period based on the accumulated cash savings in the policy.
Policy will lapseIf this happens, see if the policy can be reinstated. Some insurers may allow this if you do it within five years of lapsing. You will most likely have to pass a physical examination for the reinstated policy and pay back the premiums you would have paid plus interest. Annual premiums for the reinstated policy may be lower than those for a new, comparable policy.
Cash out the policy.This means that you can stop paying the premium and collect the available cash savings. You will no longer be covered by life insurance, but you will at least save some of the proceeds of the policy. You may, however, have to pay taxes on some of the cash value if the sum exceeds what you have paid in premiums.
Non-forfeiture optionsThere may be a “reduced paid-up” option. This means that you can stop paying premiums completely in return for a reduced death benefit and no cash saving. You may also be able to convert the permanent policy to an extended term policy for a time period based on the accumulated cash savings in the policy.
Policy will lapseIf this happens, see if the policy can be reinstated. Some insurers may allow this if you do it within five years of lapsing. You will most likely have to pass a physical examination for the reinstated policy and pay back the premiums you would have paid plus interest. Annual premiums for the reinstated policy may be lower than those for a new, comparable policy.
How often should I review my policy?
You should review all of your insurance needs at least once a year. If you have a major life change, you should contact your insurance agent or company representative. The change in your life may have a significant impact on your insurance needs. Life changes may include:
Marriage or divorce
A child or grandchild who is born or adopted
Significant changes in your health or that of your spouse/domestic partner
Taking on the financial responsibility of an aging parent
Purchasing a new home
A loved one who requires long-term care
Refinancing your home
Coming into an inheritance
Marriage or divorce
A child or grandchild who is born or adopted
Significant changes in your health or that of your spouse/domestic partner
Taking on the financial responsibility of an aging parent
Purchasing a new home
A loved one who requires long-term care
Refinancing your home
Coming into an inheritance
How should I organize and store my life insurance records?
How should I organize and store my life insurance records?
The last thing you want to happen after you die is for your beneficiaries to be unable to locate and submit a claim on your life insurance. To prevent this, you should have copies of your life insurance records in at least two places. This is to make it less likely that you’ll lose them (to fire, flood, accidental discarding, etc.) and more likely that, after your death, your beneficiaries will find them.What information should I keep?For each individual life insurance policy on your life, you should record the following information:
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 policyYou might have life insurance automatically from your employer. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from your union or trade association or other group you belong to (such as a college alumni association or an automobile club). For each of these life insurance benefits, you should record the following information:
The name of the employer or group that sponsors the insurance
The office or person to contact when it’s time to file a claim
The certificate number (comparable to the policy number under an individual policy)
The date the insurance was started
The amount of the death benefitSometimes financial programs that are mainly designed for income or other purposes have death benefits as additional features. This might include pensions, annuities, workers compensation programs, disability insurance, travel accident insurance, etc. For each such program, you should record the following information:
The type of policy that has a death benefit as part of its features
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 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 location of the original insurance policyCredit cards and lending institutions may offer 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 loanWhere should I keep the information?Keep one set of these records in your home, in a place where others who need this information are likely to find it (and after you put the information there, tell the people who’ll need it where it is). This might be with your other financial records (such as income tax, checking account, investment records), with your other legal papers (such as a copy of your will, living will, health care proxy, etc.), or anywhere your survivors are likely to look for them.Keep another set of these records “off site”—that is, outside of your home, perhaps in a safe deposit box, or with a professional or a relative who can be counted on to produce them when they’re needed.On each page, record the date on which the information was last updated. That way, if the copy in your home differs from the one in the safe deposit box, it’s easy to tell which is the more current.
The last thing you want to happen after you die is for your beneficiaries to be unable to locate and submit a claim on your life insurance. To prevent this, you should have copies of your life insurance records in at least two places. This is to make it less likely that you’ll lose them (to fire, flood, accidental discarding, etc.) and more likely that, after your death, your beneficiaries will find them.What information should I keep?For each individual life insurance policy on your life, you should record the following information:
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 policyYou might have life insurance automatically from your employer. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from your union or trade association or other group you belong to (such as a college alumni association or an automobile club). For each of these life insurance benefits, you should record the following information:
The name of the employer or group that sponsors the insurance
The office or person to contact when it’s time to file a claim
The certificate number (comparable to the policy number under an individual policy)
The date the insurance was started
The amount of the death benefitSometimes financial programs that are mainly designed for income or other purposes have death benefits as additional features. This might include pensions, annuities, workers compensation programs, disability insurance, travel accident insurance, etc. For each such program, you should record the following information:
The type of policy that has a death benefit as part of its features
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 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 location of the original insurance policyCredit cards and lending institutions may offer 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 loanWhere should I keep the information?Keep one set of these records in your home, in a place where others who need this information are likely to find it (and after you put the information there, tell the people who’ll need it where it is). This might be with your other financial records (such as income tax, checking account, investment records), with your other legal papers (such as a copy of your will, living will, health care proxy, etc.), or anywhere your survivors are likely to look for them.Keep another set of these records “off site”—that is, outside of your home, perhaps in a safe deposit box, or with a professional or a relative who can be counted on to produce them when they’re needed.On each page, record the date on which the information was last updated. That way, if the copy in your home differs from the one in the safe deposit box, it’s easy to tell which is the more current.
Do "empty nesters" need life insurance?
Quite possibly. Here are 10 reasons to own life insurance after your kids have left home:
To meet goalsIf your children are in college and/or not completely financially independent, life insurance can help “finish the job.” Although you may have saved enough for tuition, the kids’ living expenses (e.g., room and board, laundry, entertainment/activity costs, etc.) continue, but not Social Security benefit payments for the surviving spouse and children—they stop when the kids leave high school.
To support other dependentsIf you have parents, disabled adult children, or others who depend on you for financial support, life insurance would continue this support if you die before they do.
To cover the Social Security “blackout period” A recent study showed that 5 percent of married women ages 51-64 were poor, but 20 percent of widows that age were poor. This happens because many people don’t plan for life insurance to pay income to the surviving spouse after their kids are grown. As noted above, Social Security pays nothing from when the youngest child leaves high school until the surviving spouse applies for benefits based on the deceased spouse’s record (minimum age for eligibility is 60). This interval is called the “blackout period.”
To offset reduced Social Security survivor’s benefitsIf a survivor begins receiving Social Security survivor benefits earlier than the full-benefit age (66-67, depending on when the survivor was born), the Social Security benefit amount is permanently reduced. Moreover, because of the deceased’s early death, he or she didn’t get salary increases that might have boosted Social Security benefits further. A life insurance policy can help offset the effect of these “lost” raises.
To offset other “lost” retirement savingsAlso, because of the deceased’s early death, he or she didn’t get salary increases that might have boosted employer pension benefits and/or IRA contributions. A life insurance policy can help offset the effect of these reduced retirement savings.
To meet commitments based on two incomes Most two-earner couples make financial commitments (e.g., home mortgage, loans, leases, etc.) based on their combined income. Life insurance on each earner enables the survivor to continue to meet those commitments.
To pay unplanned expenses caused by an early deathYoung people don’t generally plan to have savings available to pay for funeral and burial costs, final medical expenses, estate administration and transfer costs, and federal and state income and estate taxes. Life insurance can cover these costs, which can easily reach tens of thousands of dollars.
To create a financial “safety net”Conventional wisdom says each household should have an “emergency fund” equal to about half a year’s income, to meet surprise unavoidable outlays. If the household does not already have an emergency fund, the post-death family will be even more financially vulnerable without one. Furthermore, it might also be somewhat more difficult for the survivors to obtain credit. Life insurance can solve this problem.
To offset lost income if a spouse dies after beginning Social Security retirement benefitsWhen a couple retires and begins receiving Social Security retirement benefits, each one receives an income. The earner with the larger pre-retirement income gets a benefit based on that income, and the person with the smaller (or no) pre-retirement income gets either a benefit based on his or her own earnings record or half of the spouse’s Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues but the second benefit stops—in effect, a 33 percent income reduction. Life insurance can offset this income drop.
To provide bequests to heirs and charitiesIf you want to be sure that your heirs and/or favorite charities get money after your death, you can designate some or all of your life insurance benefits to go to them. This is particularly useful if, without the life insurance, your executor would have to liquidate other assets to meet this objective.
To meet goalsIf your children are in college and/or not completely financially independent, life insurance can help “finish the job.” Although you may have saved enough for tuition, the kids’ living expenses (e.g., room and board, laundry, entertainment/activity costs, etc.) continue, but not Social Security benefit payments for the surviving spouse and children—they stop when the kids leave high school.
To support other dependentsIf you have parents, disabled adult children, or others who depend on you for financial support, life insurance would continue this support if you die before they do.
To cover the Social Security “blackout period” A recent study showed that 5 percent of married women ages 51-64 were poor, but 20 percent of widows that age were poor. This happens because many people don’t plan for life insurance to pay income to the surviving spouse after their kids are grown. As noted above, Social Security pays nothing from when the youngest child leaves high school until the surviving spouse applies for benefits based on the deceased spouse’s record (minimum age for eligibility is 60). This interval is called the “blackout period.”
To offset reduced Social Security survivor’s benefitsIf a survivor begins receiving Social Security survivor benefits earlier than the full-benefit age (66-67, depending on when the survivor was born), the Social Security benefit amount is permanently reduced. Moreover, because of the deceased’s early death, he or she didn’t get salary increases that might have boosted Social Security benefits further. A life insurance policy can help offset the effect of these “lost” raises.
To offset other “lost” retirement savingsAlso, because of the deceased’s early death, he or she didn’t get salary increases that might have boosted employer pension benefits and/or IRA contributions. A life insurance policy can help offset the effect of these reduced retirement savings.
To meet commitments based on two incomes Most two-earner couples make financial commitments (e.g., home mortgage, loans, leases, etc.) based on their combined income. Life insurance on each earner enables the survivor to continue to meet those commitments.
To pay unplanned expenses caused by an early deathYoung people don’t generally plan to have savings available to pay for funeral and burial costs, final medical expenses, estate administration and transfer costs, and federal and state income and estate taxes. Life insurance can cover these costs, which can easily reach tens of thousands of dollars.
To create a financial “safety net”Conventional wisdom says each household should have an “emergency fund” equal to about half a year’s income, to meet surprise unavoidable outlays. If the household does not already have an emergency fund, the post-death family will be even more financially vulnerable without one. Furthermore, it might also be somewhat more difficult for the survivors to obtain credit. Life insurance can solve this problem.
To offset lost income if a spouse dies after beginning Social Security retirement benefitsWhen a couple retires and begins receiving Social Security retirement benefits, each one receives an income. The earner with the larger pre-retirement income gets a benefit based on that income, and the person with the smaller (or no) pre-retirement income gets either a benefit based on his or her own earnings record or half of the spouse’s Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues but the second benefit stops—in effect, a 33 percent income reduction. Life insurance can offset this income drop.
To provide bequests to heirs and charitiesIf you want to be sure that your heirs and/or favorite charities get money after your death, you can designate some or all of your life insurance benefits to go to them. This is particularly useful if, without the life insurance, your executor would have to liquidate other assets to meet this objective.
Should I buy life insurance on my child’s life?
The main reason for buying life insurance on anyone’s life is to replace income “lost” or pay for expenses caused by the death of the insured person. If your child dies, there’s no lost income, but there will be funeral, burial and related expenses that could run to thousands of dollars, which might cause a financial hardship to the parents of the deceased child. Another reason for buying life insurance on a child’s life is to guard against the possibility that, when the child is older, he or she might not be able to buy life insurance because of intervening illness or other circumstance.Still another reason for buying life insurance on a child’s life is part of a program to teach the child financial responsibility. Typically the insurance is whole life insurance, ownership of which is transferred to the child when he or she turns 21.Most insurance advisors recommend that families spend their insurance budget to buy life and disability income insurance on the parents first, before considering insurance on children’s lives. Death of a parent, particularly an income-earner, could have financial consequences that are devastating compared to the financial effects from a child’s death.
How can I save money on life insurance?
How can I save money on life insurance? There are ways to save money when buying life insurance, but they don’t always entail paying a lower premium immediately. As your top priority, look for a policy that meets your needs. Buying the wrong benefits for a low premium is a waste, not a saving. Beyond that, here are some ways to maximize your life insurance dollars. Before you buy
Once you’ve determined what type of life insurance product to buy:
Focus on financially sound companies.Dozens of companies sell life insurance. Limit yourself to companies with high ratings from two or more independent rating agencies. A low premium from a shaky company isn’t a good buy. See How do I choose a life insurance company? for more details.
Shop around to get a sense of the premium you’re likely to pay. Quote services on the Internet may serve this purpose, or you can ask an agent or broker to get you a premium estimate.
As part of this research, determine which rate class you’ll fit into. Most companies that sell individual life insurance have several different price classes—usually called “preferred (non-tobacco),” “standard (non-tobacco),” “preferred (tobacco),” and “standard (tobacco).” A small percentage of people have health conditions or histories that disqualify them for even “standard” rates. Many in this group will be offered insurance at “impaired risk” or “nonstandard” rates.
Look into group insurance.Consider participating in your employer-sponsored life insurance program, even if you have to contribute to it financially. Employers often subsidize their group insurance costs, so it can be less expensive than individual life insurance. You might obtain coverage up to a certain level without providing evidence of good health, an advantage for some people. You’ll probably pay premiums through payroll deduction, which can be a nice convenience. However, make sure to compare group and individual rates, as depending on your age and health status, group insurance may or may not provide a savings. In comparing group to individual life insurance, remember that if you have over $50,000 of group life insurance, IRS tables determine how much it costs to provide the amount over $50,000 and charges you taxable income for that cost.
Take care of yourself.Find out into which rate class you’ll be grouped and, if necessary, consider making some lifestyle changes—don’t smoke, maintain a healthy weight and exercise regularly—to qualify for a more favorable rate class.
When you're ready to buy
Shop around to get a good rate.Life insurance is a very competitive business, and you’ll find differences of hundreds of dollars (for annual premiums) even among financially strong companies for essentially the same policy.
Consider the net cost index.How can you compare two policies, one with premiums that start lower than the other but later are higher than the other? Or one with low premiums and a low cash value, the other with higher premiums and a higher cash value? Use a net cost index—a standard method for collapsing these variables into one number. The lower the number, the better, but ignore small differences (since the indexes are approximations based on assumptions, small differences might not signal true differences in values). The agent or broker with whom you’re dealing, or the company from which you’re considering buying a policy, will provide these index numbers.
Be aware of premium discounts for particular amounts of insurance.Most companies offer rate discounts for specified insurance amounts. For example, you might actually pay a smaller premium for $250,000 of life insurance than for $200,000, or for $500,000 of life insurance than for $450,000, because a discount “kicks in” at the higher insurance amount.
Beware of “fractional premiums”.Typically, you can pay your life insurance premium once a year, once every half-year, once a quarter, or once a month. Although paying quarterly or monthly might seem to be easier to fit into your budget, some companies levy high charges for paying premiums frequently. Others levy quite small charges to do this. If a company levies high charges for paying more frequently, try budgeting so that you can pay your premium only once or twice a year.
If you’re buying a term policy, look for renewal guarantees.A renewal guarantee gives you the right to start a new term after the current one ends, paying a higher premium based on your current age, but without requiring you to undergo a new health exam or submit any other “evidence of insurability.” Without the guarantee, you’d have to shop for life insurance all over again, and if your health has deteriorated, you might have to pay much more or not get it at all.
Once you’ve determined what type of life insurance product to buy:
Focus on financially sound companies.Dozens of companies sell life insurance. Limit yourself to companies with high ratings from two or more independent rating agencies. A low premium from a shaky company isn’t a good buy. See How do I choose a life insurance company? for more details.
Shop around to get a sense of the premium you’re likely to pay. Quote services on the Internet may serve this purpose, or you can ask an agent or broker to get you a premium estimate.
As part of this research, determine which rate class you’ll fit into. Most companies that sell individual life insurance have several different price classes—usually called “preferred (non-tobacco),” “standard (non-tobacco),” “preferred (tobacco),” and “standard (tobacco).” A small percentage of people have health conditions or histories that disqualify them for even “standard” rates. Many in this group will be offered insurance at “impaired risk” or “nonstandard” rates.
Look into group insurance.Consider participating in your employer-sponsored life insurance program, even if you have to contribute to it financially. Employers often subsidize their group insurance costs, so it can be less expensive than individual life insurance. You might obtain coverage up to a certain level without providing evidence of good health, an advantage for some people. You’ll probably pay premiums through payroll deduction, which can be a nice convenience. However, make sure to compare group and individual rates, as depending on your age and health status, group insurance may or may not provide a savings. In comparing group to individual life insurance, remember that if you have over $50,000 of group life insurance, IRS tables determine how much it costs to provide the amount over $50,000 and charges you taxable income for that cost.
Take care of yourself.Find out into which rate class you’ll be grouped and, if necessary, consider making some lifestyle changes—don’t smoke, maintain a healthy weight and exercise regularly—to qualify for a more favorable rate class.
When you're ready to buy
Shop around to get a good rate.Life insurance is a very competitive business, and you’ll find differences of hundreds of dollars (for annual premiums) even among financially strong companies for essentially the same policy.
Consider the net cost index.How can you compare two policies, one with premiums that start lower than the other but later are higher than the other? Or one with low premiums and a low cash value, the other with higher premiums and a higher cash value? Use a net cost index—a standard method for collapsing these variables into one number. The lower the number, the better, but ignore small differences (since the indexes are approximations based on assumptions, small differences might not signal true differences in values). The agent or broker with whom you’re dealing, or the company from which you’re considering buying a policy, will provide these index numbers.
Be aware of premium discounts for particular amounts of insurance.Most companies offer rate discounts for specified insurance amounts. For example, you might actually pay a smaller premium for $250,000 of life insurance than for $200,000, or for $500,000 of life insurance than for $450,000, because a discount “kicks in” at the higher insurance amount.
Beware of “fractional premiums”.Typically, you can pay your life insurance premium once a year, once every half-year, once a quarter, or once a month. Although paying quarterly or monthly might seem to be easier to fit into your budget, some companies levy high charges for paying premiums frequently. Others levy quite small charges to do this. If a company levies high charges for paying more frequently, try budgeting so that you can pay your premium only once or twice a year.
If you’re buying a term policy, look for renewal guarantees.A renewal guarantee gives you the right to start a new term after the current one ends, paying a higher premium based on your current age, but without requiring you to undergo a new health exam or submit any other “evidence of insurability.” Without the guarantee, you’d have to shop for life insurance all over again, and if your health has deteriorated, you might have to pay much more or not get it at all.
How should I choose a life insurance agent?
When you’re considering buying life insurance, it’s important to choose an agent or broker who can help you. Buying life insurance can be complicated or confusing. The key to buying the right amount and the right type of policy at a good rate is a good agent or broker. You should choose one who:
Understands your financial situation, including your attitudes about risk, your income and estate tax “brackets,” and your other financial assets and obligations, as well as your personal situation (that is, your age, marital status, dependents, etc.)
Explains, in terms you can easily understand, issues, options and planned use of life insurance in your financial program
Provides you with a personalized written document that -records the facts of your current financial and personal situation and-describes the features of the life insurance and how it fits into your situation
Doesn’t pressure you into a decision, but works with you until you’re ready and convinced that you are doing what is best for you
Is prepared to review with you periodically—perhaps every three years or so—whether the product continues to be suitable for your needs and circumstances
Is licensed by your state insurance department.If you don’t have an agent or broker who fits this description, ask your lawyer, accountant, friends, relatives and business associates for the names of insurance agents or brokers with an excellent reputation. You can also use this link: http://www.life-line.org/find_agent.html to connect with the nearly 70,000 members of the National Association of Insurance and Financial Advisors (NAIFA), who subscribe to the organization’s Code of Ethics ( http://www.naifa.org/about/ethics.cfm ). An agent or broker who has one or more professional financial services designations has demonstrated a commitment to specialized education in the field. Designations you might see include the following: The Compensation IssueLike everyone else, agents and brokers get paid for their services, which are enriched by their education and experience. Most agents and brokers are paid by commission, but some work on a fee basis. Typically, the largest part of the compensation is paid at the time you purchase the annuity, since most of the agent’s or broker’s work occurs at that time or just before it. As with any professional service, you should understand how your agent or broker will be compensated and how that might affect the purchase recommendation.The bottom line? The best way to protect yourself is to make sure you understand what you’re buying and the nature of the product’s limitations, penalties or fees if you want to drop the policy.
Understands your financial situation, including your attitudes about risk, your income and estate tax “brackets,” and your other financial assets and obligations, as well as your personal situation (that is, your age, marital status, dependents, etc.)
Explains, in terms you can easily understand, issues, options and planned use of life insurance in your financial program
Provides you with a personalized written document that -records the facts of your current financial and personal situation and-describes the features of the life insurance and how it fits into your situation
Doesn’t pressure you into a decision, but works with you until you’re ready and convinced that you are doing what is best for you
Is prepared to review with you periodically—perhaps every three years or so—whether the product continues to be suitable for your needs and circumstances
Is licensed by your state insurance department.If you don’t have an agent or broker who fits this description, ask your lawyer, accountant, friends, relatives and business associates for the names of insurance agents or brokers with an excellent reputation. You can also use this link: http://www.life-line.org/find_agent.html to connect with the nearly 70,000 members of the National Association of Insurance and Financial Advisors (NAIFA), who subscribe to the organization’s Code of Ethics ( http://www.naifa.org/about/ethics.cfm ). An agent or broker who has one or more professional financial services designations has demonstrated a commitment to specialized education in the field. Designations you might see include the following: The Compensation IssueLike everyone else, agents and brokers get paid for their services, which are enriched by their education and experience. Most agents and brokers are paid by commission, but some work on a fee basis. Typically, the largest part of the compensation is paid at the time you purchase the annuity, since most of the agent’s or broker’s work occurs at that time or just before it. As with any professional service, you should understand how your agent or broker will be compensated and how that might affect the purchase recommendation.The bottom line? The best way to protect yourself is to make sure you understand what you’re buying and the nature of the product’s limitations, penalties or fees if you want to drop the policy.
How can I assess the financial strength of an insurance company?
Five independent agencies—A.M. Best, Fitch, Moody’s, Standard & Poor’s, and Weiss—rate the financial strength of insurance companies. Each has its own rating scale, its own rating standards, its own population of rated companies, and its own distribution of companies across its scale. Each agency uses numbers or plusses and minuses to indicate minor variations in rating from another rating class.The agencies disagree often enough so that you should consider a company’s rating from two or more agencies before judging whether to buy or keep a policy from that company. Moreover, agencies will announce changes of ratings on any day. It’s probably prudent to check annually on the ratings of any company you’re interested in.Some points for using the ratings:
Don’t rely only on what the insurance companies say about their ratings from these agencies. Companies are likely to highlight a higher rating from one agency and ignore a lower one from another agency, or to select the most favorable comments from a rating agency’s report.
To use the ratings from more than one independent agency, you need to understand that each agency’s rating code is different from the others. For example, an A+ from A.M. Best is the next-to-top rating of its 15 categories, but an A+ from Fitch or S&P is their 5th-highest rating (out of 24 categories for Fitch, and out of 19 categories for S&P). Moreover, Moody’s doesn’t have an A+ rating.However, the ratings can be classified into “secure” and “vulnerable” mega-categories. Here, as of August 2005, are the rating scales for each of the “secure” rating classes, and all the “vulnerable” classes combined (source, except for Weiss: The Insurance Forum, September 2005 issue).
Don’t rely only on what the insurance companies say about their ratings from these agencies. Companies are likely to highlight a higher rating from one agency and ignore a lower one from another agency, or to select the most favorable comments from a rating agency’s report.
To use the ratings from more than one independent agency, you need to understand that each agency’s rating code is different from the others. For example, an A+ from A.M. Best is the next-to-top rating of its 15 categories, but an A+ from Fitch or S&P is their 5th-highest rating (out of 24 categories for Fitch, and out of 19 categories for S&P). Moreover, Moody’s doesn’t have an A+ rating.However, the ratings can be classified into “secure” and “vulnerable” mega-categories. Here, as of August 2005, are the rating scales for each of the “secure” rating classes, and all the “vulnerable” classes combined (source, except for Weiss: The Insurance Forum, September 2005 issue).
How do I pick a life insurance company?
Roughly 1,000 life insurance companies sell life insurance in the U.S., but many are members of groups of companies and so aren’t really competitors with each other. Having separate companies enables a group to offer its products through separate distribution channels, to more efficiently meet the regulatory requirements of particular states, or to achieve other organizational goals. There are an estimated three hundred company groups.Moreover, not every group has a company licensed to operate in each state. As a general rule, you should buy from a company licensed in your state, because then can you rely on your state insurance department to help if there’s a problem. And if the insurance company becomes insolvent, your state’s life insurance guaranty fund will help only policyholders of companies it has licensed. To find out which companies are licensed in any state, contact that state’s state insurance department.There are several other points to keep in mind when selecting a life insurance company:
Product – most, but not all, companies offer a broad range of policies and features, so choose a company that offers the product and features that meet your needs.
Identity – life insurance company names can be confusing, and different companies can have similar names. Life insurance company names often use words that suggest financial strength (such as Guaranty, Reserve, or Security), financial sophistication (such as Bankers, Financial, or Investors), maturity (such as First, Pioneer, or Old), dependability (such as Assurance, Reliable, Trust), fairness (such as Beneficial, Equitable, or Peoples), breadth of operations (such as Continental, National, or International), government (such as American, Capital, or Republic), or well-known and respected Americans (such as Jefferson, Franklin, or Lincoln). Be sure you know the full name, home office location, and affiliation (if any) of any company you are considering (for an example, click here).
Financial Solidity – life insurance is a long-term arrangement. There is no guarantee for life insurance policyholders similar to that provided for bank accounts by the Federal Deposit Insurance Corporation (FDIC). Select a company that is likely to be financially sound for many years, by using ratings from independent rating agencies.
Market ethics – some life insurance companies subscribe to the principles and codes of conduct of the Insurance Marketplace Standards Association, a nonprofit organization that promotes ethical conduct in life insurance marketing.
Advice and service – for many people, life insurance is a strange, complex product, so that it helps to deal with a representative with whom you can communicate and who is attentive to your needs. This might be connected to the selection of a life insurance company because some agents represent only one or a very few life insurance companies. See How do I select a life insurance agent?
Claims – you may want to check a national claims database to see what complaint information it has on a company. Also, your state insurance department will be able to tell you if the insurance company you are considering doing business with had many consumer complaints about its service relative to the number of policies it sold.
Premium and cost – The premium is the amount you pay the company for the life insurance contract with all of its benefits. Even for a given death benefit and type of insurance (e.g., term life), the premium can vary widely among companies, either because some companies’ policies have features that others don’t, or because some charge more than others for the same coverage. So the first step in comparing policies is to make sure you compare similar insurance plans, based on -Your age-The type of policy and policy features-The amount of insurance you are purchasingThe premium for the policy isn’t the same as the cost of the protection portion of the policy. One policy might have a higher premium but also offer more benefits (for example, it might pay policy dividends) than another. Or both might promise dividends, but in different amounts at different points in time. In each case, the higher-premium policy might have a lower cost of protection. How can you tell what a policy’s cost is? Companies should tell you a policy’s Net Payment Cost Index and its Surrender Cost Index. Use the Surrender Cost Index if you’re thinking of keeping the insurance only for a specific period of time; use the Net Payment Cost Index if you expect to keep the policy indefinitely. Generally, the lower the cost index, the better.
Product – most, but not all, companies offer a broad range of policies and features, so choose a company that offers the product and features that meet your needs.
Identity – life insurance company names can be confusing, and different companies can have similar names. Life insurance company names often use words that suggest financial strength (such as Guaranty, Reserve, or Security), financial sophistication (such as Bankers, Financial, or Investors), maturity (such as First, Pioneer, or Old), dependability (such as Assurance, Reliable, Trust), fairness (such as Beneficial, Equitable, or Peoples), breadth of operations (such as Continental, National, or International), government (such as American, Capital, or Republic), or well-known and respected Americans (such as Jefferson, Franklin, or Lincoln). Be sure you know the full name, home office location, and affiliation (if any) of any company you are considering (for an example, click here).
Financial Solidity – life insurance is a long-term arrangement. There is no guarantee for life insurance policyholders similar to that provided for bank accounts by the Federal Deposit Insurance Corporation (FDIC). Select a company that is likely to be financially sound for many years, by using ratings from independent rating agencies.
Market ethics – some life insurance companies subscribe to the principles and codes of conduct of the Insurance Marketplace Standards Association, a nonprofit organization that promotes ethical conduct in life insurance marketing.
Advice and service – for many people, life insurance is a strange, complex product, so that it helps to deal with a representative with whom you can communicate and who is attentive to your needs. This might be connected to the selection of a life insurance company because some agents represent only one or a very few life insurance companies. See How do I select a life insurance agent?
Claims – you may want to check a national claims database to see what complaint information it has on a company. Also, your state insurance department will be able to tell you if the insurance company you are considering doing business with had many consumer complaints about its service relative to the number of policies it sold.
Premium and cost – The premium is the amount you pay the company for the life insurance contract with all of its benefits. Even for a given death benefit and type of insurance (e.g., term life), the premium can vary widely among companies, either because some companies’ policies have features that others don’t, or because some charge more than others for the same coverage. So the first step in comparing policies is to make sure you compare similar insurance plans, based on -Your age-The type of policy and policy features-The amount of insurance you are purchasingThe premium for the policy isn’t the same as the cost of the protection portion of the policy. One policy might have a higher premium but also offer more benefits (for example, it might pay policy dividends) than another. Or both might promise dividends, but in different amounts at different points in time. In each case, the higher-premium policy might have a lower cost of protection. How can you tell what a policy’s cost is? Companies should tell you a policy’s Net Payment Cost Index and its Surrender Cost Index. Use the Surrender Cost Index if you’re thinking of keeping the insurance only for a specific period of time; use the Net Payment Cost Index if you expect to keep the policy indefinitely. Generally, the lower the cost index, the better.
How should I choose what type of life insurance to buy?
You should consider term life insurance if:
You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.
You need a large amount of life insurance, but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefit is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed. Unlike permanent insurance, you will not build equity in the form of cash savings.If you think your financial needs may change, you may also want to look into “convertible” term policies. These allow you to convert to permanent insurance without a medical examination in exchange for higher premiums. Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.You should consider permanent life insurance if:
You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be 100.
You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you can’t pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before it’s repaid, the insurance company collects what is due the company before determining what’s goes to your beneficiary.Keep in mind that premiums for permanent policies are generally higher than for term insurance. However, the premium in a permanent policy remains the same no matter how old you are, while term can go up substantially every time you renew it.There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life.
You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.
You need a large amount of life insurance, but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefit is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed. Unlike permanent insurance, you will not build equity in the form of cash savings.If you think your financial needs may change, you may also want to look into “convertible” term policies. These allow you to convert to permanent insurance without a medical examination in exchange for higher premiums. Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.You should consider permanent life insurance if:
You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be 100.
You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you can’t pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before it’s repaid, the insurance company collects what is due the company before determining what’s goes to your beneficiary.Keep in mind that premiums for permanent policies are generally higher than for term insurance. However, the premium in a permanent policy remains the same no matter how old you are, while term can go up substantially every time you renew it.There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life.
Why should I purchase permanent insurance?
A permanent life policy provides lifelong insurance protection. The policy pays a death benefit if you die tomorrow or if you live to be a hundred. There is also a savings element that will grow on a tax-deferred basis and may become substantial over time. Because of the savings element, premiums are generally higher for permanent than for term insurance. However, the premium in a permanent policy remains the same, while term can go up substantially every time you renew it.There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life. In a permanent policy, the cash value is different from its face value amount. The face amount is the money that will be paid at death. Cash value is the amount of money available to you. There are a number of ways that you can use this cash savings. For instance, you can take a loan against it or you can surrender the policy before you die to collect the accumulated savings.There are unique features to a permanent policy such as:
You can lock in premiums when you purchase the policy. By purchasing a permanent policy, the premium will not increase as you age or if your health status changes.
The policy will accumulate cash savings.Depending on the policy, you may be able to withdraw some of the money. You also may have these options:
Use the cash value to pay premiums. If unexpected expenses occur, you can stop or reduce your premiums. The cash value in the policy can be used toward the premium payment to continue your current insurance protection – providing there is enough money accumulated.
Borrow from the insurance company using the cash value in your life insurance as collateral. Like all loans, you will ultimately need to repay the insurer with interest. Otherwise, the policy may lapse or your beneficiaries will receive a reduced death benefit. However, unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions.
You can lock in premiums when you purchase the policy. By purchasing a permanent policy, the premium will not increase as you age or if your health status changes.
The policy will accumulate cash savings.Depending on the policy, you may be able to withdraw some of the money. You also may have these options:
Use the cash value to pay premiums. If unexpected expenses occur, you can stop or reduce your premiums. The cash value in the policy can be used toward the premium payment to continue your current insurance protection – providing there is enough money accumulated.
Borrow from the insurance company using the cash value in your life insurance as collateral. Like all loans, you will ultimately need to repay the insurer with interest. Otherwise, the policy may lapse or your beneficiaries will receive a reduced death benefit. However, unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions.
What are the different types of permanent policies?
Whole or ordinary lifeThis is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.
Universal or adjustable lifeThis type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments – providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.
Variable lifeThis policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.
Variable-universal lifeIf you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.
Universal or adjustable lifeThis type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments – providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.
Variable lifeThis policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.
Variable-universal lifeIf you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.
What are the types of term insurance policies?
Term insurance comes in two basic varieties—level term and decreasing term. These days, almost everyone buys level term insurance. The terms “level” and “decreasing” refer to the death benefit amount during the term of the policy. A level term policy pays the same benefit amount if death occurs at any point during the term.Common types of level term are:
yearly- (or annually-) renewable term
5-year renewable term
10-year term
15-year term
20-year term
25-year term
30-year term
term to a specified age (usually 65)Yearly renewable term, once popular, is no longer a top seller. The most popular type is now 20-year term. Most companies will not sell term insurance to an applicant for a term that ends past his or her 80th birthday.If a policy is “renewable,” that means it continues in force for an additional term or terms, up to a specified age, even if the health of the insured (or other factors) would cause him or her to be rejected if he or she applied for a new life insurance policy.Generally, the premium for the policy is based on the insured person’s age and health at the policy’s start, and the premium remains the same (level) for the length of the term. So, premiums for 5-year renewable term can be level for 5 years, then to a new rate reflecting the new age of the insured, and so on every five years. Some longer term policies will guarantee that the premium will not increase during the term; others don’t make that guarantee, enabling the insurance company to raise the rate during the policy’s term.Some term policies are convertible. This means that the policy’s owner has the right to change it into a permanent type of life insurance without additional evidence of insurability.“Return of Premium”In most types of term insurance, including homeowners and auto insurance, if you haven’t had a claim under the policy by the time it expires, you get no refund of the premium. Your premium bought the protection that you had but didn’t need, and you’ve received fair value. Some term life insurance consumers have been unhappy at this outcome, so some insurers have created term life with a “return of premium” feature. The premiums for the insurance with this feature are often significantly higher than for policies without it, and they generally require that you keep the policy in force to its term or else you forfeit the return of premium benefit. Some policies will return the base premium but not the extra premium (for the return benefit), and others will return both.
yearly- (or annually-) renewable term
5-year renewable term
10-year term
15-year term
20-year term
25-year term
30-year term
term to a specified age (usually 65)Yearly renewable term, once popular, is no longer a top seller. The most popular type is now 20-year term. Most companies will not sell term insurance to an applicant for a term that ends past his or her 80th birthday.If a policy is “renewable,” that means it continues in force for an additional term or terms, up to a specified age, even if the health of the insured (or other factors) would cause him or her to be rejected if he or she applied for a new life insurance policy.Generally, the premium for the policy is based on the insured person’s age and health at the policy’s start, and the premium remains the same (level) for the length of the term. So, premiums for 5-year renewable term can be level for 5 years, then to a new rate reflecting the new age of the insured, and so on every five years. Some longer term policies will guarantee that the premium will not increase during the term; others don’t make that guarantee, enabling the insurance company to raise the rate during the policy’s term.Some term policies are convertible. This means that the policy’s owner has the right to change it into a permanent type of life insurance without additional evidence of insurability.“Return of Premium”In most types of term insurance, including homeowners and auto insurance, if you haven’t had a claim under the policy by the time it expires, you get no refund of the premium. Your premium bought the protection that you had but didn’t need, and you’ve received fair value. Some term life insurance consumers have been unhappy at this outcome, so some insurers have created term life with a “return of premium” feature. The premiums for the insurance with this feature are often significantly higher than for policies without it, and they generally require that you keep the policy in force to its term or else you forfeit the return of premium benefit. Some policies will return the base premium but not the extra premium (for the return benefit), and others will return both.
What is a beneficiary?
A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit. You can name:
One person
Two or more people
The trustee of a trust you’ve set up
A charity
Your estateIf you don’t name a beneficiary, the death benefit will be paid to your estate. Two “levels” of beneficiariesYour 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.Besides naming beneficiaries, you should specify how the benefits are to be handled if one or more beneficiaries can’t be found. For example, suppose you have two children and you name each one to receive half of the death benefit. If one of the children dies before you do, do you want the other child to get the entire death benefit, or the deceased child’s heirs to get his or her share?If the death benefit goes to your estate, probate proceedings could delay distributing the money, and the cost of probate could diminish the amount available to your heirs. Choosing beneficiaries, and keeping those choices up-to-date, is an important part of owning life insurance. The birth or adoption of a child, marriage or divorce can affect your initial choice. Review your beneficiary designation as new situations arise in order to make sure your choice is still appropriate.
One person
Two or more people
The trustee of a trust you’ve set up
A charity
Your estateIf you don’t name a beneficiary, the death benefit will be paid to your estate. Two “levels” of beneficiariesYour 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.Besides naming beneficiaries, you should specify how the benefits are to be handled if one or more beneficiaries can’t be found. For example, suppose you have two children and you name each one to receive half of the death benefit. If one of the children dies before you do, do you want the other child to get the entire death benefit, or the deceased child’s heirs to get his or her share?If the death benefit goes to your estate, probate proceedings could delay distributing the money, and the cost of probate could diminish the amount available to your heirs. Choosing beneficiaries, and keeping those choices up-to-date, is an important part of owning life insurance. The birth or adoption of a child, marriage or divorce can affect your initial choice. Review your beneficiary designation as new situations arise in order to make sure your choice is still appropriate.
How is life insurance sold?
You can buy life insurance either as an “individual” or as part of a “group” plan.Individual PolicyWhen you buy an individual policy, you choose the company, the plan, and the benefits and features that are right for you and your family. You might be able to buy the policy from the same agent or company representative who sells you property and liability insurance for your home, auto or business. And although you won’t qualify for any discounts by buying your life insurance and other insurance from the same representative, working with a single advisor for all your insurance needs can make your financial life simpler.Individual policies are typically sold through insurance agents or brokers. If you buy a policy through an agent or broker, you will pay a commission, also called a “load,” that is built into the premium rate. The commission compensates the agent or broker for the time spent advising you on how much and what type of life insurance to buy, for facilitating the application process, and for any further service that’s needed in future years to keep the policy up-to-date (such as changing beneficiary designations, arranging policy loans or coordinating your financial plans with your lawyer and accountant). There are two other ways to buy individual life insurance. In Connecticut, Massachusetts and New York, you can buy it from a savings bank. Or you can buy a policy directly from an insurance company or from a fee-only financial advisor—what’s known as a “no load” or “low load” policy. Although there is no sales commission on these policies, the company will still have charges built into the premium to cover its marketing expenses, application processing expenses and subsequent services. Finding an insurance company that will sell you a no-load policy isn’t easy; typing in “no load life insurance” on Internet search engines will in many cases lead you to an agent or broker.Group PolicyYou might have life insurance automatically from your employer; many large companies do this. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from a union or trade association or other group you belong to (such as a college alumni association or an automobile club).Compared to buying an individual life insurance policy, there are several advantages to buying life insurance under a group policy:
Group purchase can sometimes offer you a lower rate for a given death benefit either because the employer or other group sponsor subsidizes the premium or because the rates are averages weighted by people younger than you.
There are virtually no health qualifications for getting the group coverage.
Premium payment is usually by payroll deduction (for employer-based group coverage) or linked with other payments (e.g., credit card bills), lowering the chance of missing a payment.Most employer group plans are term insurance, but if you leave that employer your state may require that you be allowed to convert the policy to a form of whole life insurance with the same insurance company that provides the group life insurance. You would then pay premiums directly to the company and keep the insurance in force. This can be an advantage if you are older, or have experienced deteriorating health, as it gives you the opportunity to qualify for whole life insurance without having a medical exam.Credit Life InsuranceCredit cards and lending institutions may offer life insurance to pay off your outstanding loans in the event of your death. This is generally made available in two ways
As part of the loan at no extra charge. In this case the cost of the life insurance is borne by the lender and is included in its interest rate or other finance charges. If you have this type of credit life insurance, you don’t need separate life insurance to pay off that loan if you die.
As an option at an extra charge. In this case, you should usually reject the optional coverage, provided that you have some other life insurance (group or individual) that can be designated to pay off the loan if you die. If you’re under age 50 and you don’t have other insurance that could pay off this loan, consider buying individual life insurance for this purpose as the rates will probably be better. At 50 or over (or younger with health issues), if you have no other life insurance for this purpose, the optional credit life insurance is likely to be cheaper than individual life insurance.
Group purchase can sometimes offer you a lower rate for a given death benefit either because the employer or other group sponsor subsidizes the premium or because the rates are averages weighted by people younger than you.
There are virtually no health qualifications for getting the group coverage.
Premium payment is usually by payroll deduction (for employer-based group coverage) or linked with other payments (e.g., credit card bills), lowering the chance of missing a payment.Most employer group plans are term insurance, but if you leave that employer your state may require that you be allowed to convert the policy to a form of whole life insurance with the same insurance company that provides the group life insurance. You would then pay premiums directly to the company and keep the insurance in force. This can be an advantage if you are older, or have experienced deteriorating health, as it gives you the opportunity to qualify for whole life insurance without having a medical exam.Credit Life InsuranceCredit cards and lending institutions may offer life insurance to pay off your outstanding loans in the event of your death. This is generally made available in two ways
As part of the loan at no extra charge. In this case the cost of the life insurance is borne by the lender and is included in its interest rate or other finance charges. If you have this type of credit life insurance, you don’t need separate life insurance to pay off that loan if you die.
As an option at an extra charge. In this case, you should usually reject the optional coverage, provided that you have some other life insurance (group or individual) that can be designated to pay off the loan if you die. If you’re under age 50 and you don’t have other insurance that could pay off this loan, consider buying individual life insurance for this purpose as the rates will probably be better. At 50 or over (or younger with health issues), if you have no other life insurance for this purpose, the optional credit life insurance is likely to be cheaper than individual life insurance.
What are the principal types of life insurance?
What are the principal types of life insurance?
There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.TermTerm 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.In 2003, virtually all (97 percent) of the term life insurance bought was level term. For more on the different types of term life insurance,
Whole Life/PermanentWhole 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 comapny 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.By law, when these “overpayments” reach a certain amount, they must be available to the policyowner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy. In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.For more on the different types of whole life/permanent insurance,
There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.TermTerm 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.In 2003, virtually all (97 percent) of the term life insurance bought was level term. For more on the different types of term life insurance,
Whole Life/PermanentWhole 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 comapny 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.By law, when these “overpayments” reach a certain amount, they must be available to the policyowner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy. In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.For more on the different types of whole life/permanent insurance,
How much life insurance do I need?
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.You should also plan to replace “hidden income” that would be lost at death. Hidden income is income that you receive through your employment but that isn’t part of your gross wages. It includes things like your employer’s subsidy of your health insurance premium, the matching contribution to your 401(k) plan, and many other “perks,” large and small. This is an often-overlooked insurance need: the cost of replacing just your health insurance and retirement contributions could be the equivalent of $2,000 per month or more.Of course, you should also plan for expenses that arise at death. These include the funeral costs, taxes and administrative costs associated with “winding up” an estate and passing property to heirs. At a minimum, plan for $15,000.Other sources of incomeMost families have some sources of post-death income besides life insurance. The most common source is Social Security survivors’ benefits. Social Security survivors’ benefits can be substantial. For example, for a 35-year-old person who was earning a $36,000 salary at death, maximum Social Security survivors’ monthly income benefits for a spouse and two children under age 18 could be about $2,400 per month, and this amount would increase each year to match inflation. (It drops slightly when the survivors are a spouse and one child under 18, and stops completely when there are no children under 18. Also, the surviving spouse’s benefit would be reduced if he or she earns income over a certain limit.)Many also have life insurance through an employer plan, and some from another affiliation, such as through an association they belong to or a credit card. If you have a vested pension benefit, it might have a death component. Although these sources might provide a lot of income, they rarely provide enough. And it probably isn’t wise to count on death benefits that are connected with a particular job, since you might die after switching to a different job, or while you are unemployed.A multiple of salary?Many pundits recommend buying life insurance equal to a multiple of your salary. For example, one financial advice columnist recommends buying insurance equal to 20 times your salary before taxes. She chose 20 because, if the benefit is invested in bonds that pay 5 percent interest, it would produce an amount equal to your salary at death, so the survivors could live off the interest and wouldn’t have to “invade” the principal.However, this simplistic formula implicitly assumes no inflation and assumes that one could assemble a bond portfolio that, after expenses, would provide a 5 percent interest stream every year. But assuming inflation is 3 percent per year, the purchasing power of a gross income of $50,000 would drop to about $38,300 in the 10th year. To avoid this income drop-off, the survivors would have to “invade” the principal each year. And if they did, they would run out of money in the 16th year.The “multiple of salary” approach also ignores other sources of income, such as those mentioned previously.A simple exampleSuppose a surviving spouse didn’t work and had two children, ages 4 and 1, in her care. Suppose her deceased husband earned $36,000 at death and was covered by Social Security but had no other death benefits or life insurance. Assume the surviving spouse is 36.Assume that the deceased spent $6,000 from income on his own living expenses and the cost of working. Assume, for simplicity, that the deceased performed services for the family (such as property maintenance, income tax and other financial management, and occasional child care) for which the survivors will need to pay $6,000 per year. Assume that the survivors will have to buy health insurance to replace the coverage the deceased had at work, and that this will cost $12,000 per year.Taken together, the survivors will need to replace the equivalent of $48,000 of income, adjusted each year for an assumed 4 percent inflation.Thanks to Social Security, the survivors would need life insurance to replace only about $1,700 per month of lost wage income (adjusted for inflation) for 14 years until the older child reaches 18; Social Security would provide the rest. The survivors would need life insurance to replace about $2,100 per month (adjusted for inflation) for three more years when the non-working surviving spouse has only one child under 18 in her care.The life insurance amount needed today to provide the $1,700 and $2,100 monthly amounts is roughly $360,000. Adding $15,000 for funeral and other final expenses brings the minimum life insurance needed for the example to $375,000.What’s left out?The example leaves out some potentially significant unmet financial needs, such as
The surviving spouse will have no income from Social Security from age 53 until 60 unless the deceased buys additional life insurance to cover this period. It could be assumed that the surviving spouse will obtain a job at or before this time, but she could also become disabled or otherwise unable to work. If life insurance were bought for this period, the additional amount of insurance needed would be about $335,000.
Some people like to plan to use life insurance to pay off the home mortgage at the primary income earner’s death, so that the survivors are less likely to face the threat of losing their home. If life insurance were bought for this goal, the additional amount of insurance needed is the amount of the unpaid balance on the mortgage.
Some people like to provide money to pay to send their children to college out of their life insurance. We may assume that each child will attend a public college for four years and will need $15,000 per year. However, college costs have been rising faster than inflation for many decades, and this trend is unlikely to slow down. If life insurance were bought for this goal, the additional amount of insurance needed would be about $200,000.
In the example, no money is planned for the surviving spouse’s retirement, except for what the spouse would be entitled to receive from Social Security (about $1,200 per month). It could be assumed that the surviving spouse will obtain a job and will either participate in an employer’s retirement plan or save with an IRA, but she could also become disabled or otherwise unable to work. If life insurance were bought to provide the equivalent of $4000 per month starting at age 60 until 65 and $3,000 per month from 65 on (because at 65 Medicare will make carrying private health insurance unnecessary), the additional amount of insurance needed would be about $465,000.
The surviving spouse will have no income from Social Security from age 53 until 60 unless the deceased buys additional life insurance to cover this period. It could be assumed that the surviving spouse will obtain a job at or before this time, but she could also become disabled or otherwise unable to work. If life insurance were bought for this period, the additional amount of insurance needed would be about $335,000.
Some people like to plan to use life insurance to pay off the home mortgage at the primary income earner’s death, so that the survivors are less likely to face the threat of losing their home. If life insurance were bought for this goal, the additional amount of insurance needed is the amount of the unpaid balance on the mortgage.
Some people like to provide money to pay to send their children to college out of their life insurance. We may assume that each child will attend a public college for four years and will need $15,000 per year. However, college costs have been rising faster than inflation for many decades, and this trend is unlikely to slow down. If life insurance were bought for this goal, the additional amount of insurance needed would be about $200,000.
In the example, no money is planned for the surviving spouse’s retirement, except for what the spouse would be entitled to receive from Social Security (about $1,200 per month). It could be assumed that the surviving spouse will obtain a job and will either participate in an employer’s retirement plan or save with an IRA, but she could also become disabled or otherwise unable to work. If life insurance were bought to provide the equivalent of $4000 per month starting at age 60 until 65 and $3,000 per month from 65 on (because at 65 Medicare will make carrying private health insurance unnecessary), the additional amount of insurance needed would be about $465,000.
Why should I buy life insurance?
Why should I buy life insurance?
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
Replace income for dependentsIf people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.
Pay final expensesLife insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
Create an inheritance for your heirsEven if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
Pay federal “death” taxes and state “death” taxesLife insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal “death” tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level “death” taxes.
Make significant charitable contributionsBy making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy’s premiums.
Create a source of savingsSome types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
Replace income for dependentsIf people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.
Pay final expensesLife insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
Create an inheritance for your heirsEven if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
Pay federal “death” taxes and state “death” taxesLife insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal “death” tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level “death” taxes.
Make significant charitable contributionsBy making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy’s premiums.
Create a source of savingsSome types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).
Apr 21, 2007
Insurance
Custom Whole Life New!New York Life's Custom
Whole Life Insurance is the first whole life insurance product that allows you to select how long you pay premiums.
The unique flexibility of Custom Whole Life allows you to coordinate the paid–up date of your policy precisely with your individual financial goals and timetable, while enjoying all the traditional features of whole life, including lifetime life insurance protection and tax–deferred cash value accumulation.
Whole Life Insurance is the first whole life insurance product that allows you to select how long you pay premiums.
The unique flexibility of Custom Whole Life allows you to coordinate the paid–up date of your policy precisely with your individual financial goals and timetable, while enjoying all the traditional features of whole life, including lifetime life insurance protection and tax–deferred cash value accumulation.
Term life insurance&Whole life insurance
Which is better (our opinion)? Young families with large financial obligations are usually better off with term life insurance policies.
The substantially lower premiums enable them to purchase sufficient coverage to protect against loss of income. Any discretionary investment funds can be placed in other vehicles (mutual funds, money market accounts, etc.) that are likely to generate returns similar to or better than life insurance policies.
Whole life insurance is often purchased by people for tax and estate planning purposes. You should consult with your financial advisor.
The substantially lower premiums enable them to purchase sufficient coverage to protect against loss of income. Any discretionary investment funds can be placed in other vehicles (mutual funds, money market accounts, etc.) that are likely to generate returns similar to or better than life insurance policies.
Whole life insurance is often purchased by people for tax and estate planning purposes. You should consult with your financial advisor.
Whole life insurance
Whole life insurance, also called permanent insurance, is permanent and does not expire (assuming you continue to pay the premiums).
It provides coverage similar to term life insurance, but it also provides an investment vehicle.
A portion of the premium goes for life insurance, while the rest goes into an investment account.
This account can be either an interest bearing account or a variable (stocks and bonds) investment account.
Whole life insurance
It provides coverage similar to term life insurance, but it also provides an investment vehicle.
A portion of the premium goes for life insurance, while the rest goes into an investment account.
This account can be either an interest bearing account or a variable (stocks and bonds) investment account.
Whole life insurance
TERM LIFE INSURANCE
ABOUT TERM LIFE INSURANCE
Term life insurance, also called temporary insurance, covers a person against death for a limited time, the term.
For example, the term might be until children are grown, or until college is paid for, or until retirement.
You pay for the policy period and at the end of the term, the contract or policy expires.
If no claims are made against the policy during the term, you don't receive any benefits after the policy expires, just like auto or homeowners insurance.
TERM LIFE INSURANCE DEFINITION
Term life insurance, also called temporary insurance, covers a person against death for a limited time, the term.
For example, the term might be until children are grown, or until college is paid for, or until retirement.
You pay for the policy period and at the end of the term, the contract or policy expires.
If no claims are made against the policy during the term, you don't receive any benefits after the policy expires, just like auto or homeowners insurance.
TERM LIFE INSURANCE DEFINITION
Subscribe to:
Posts (Atom)