Retirement and Life Insurance

Retirement and Life Insurance

Sometimes, it is hard for people to gauge whether they need to buy life insurance or not. Just like in any kind of cash transaction, you must define the need that you have in order to assess whether the purchase is valid. This is the same technique that is required when you are checking if life insurance is a wise investment for you to make in your retirement age.

People who are preparing for retirement in their future must assess the financial goals that they have, as well as the financial situation. If you and your spouse possess a business that would still be generating a substantial amount of income monthly even when one of you suddenly dies, then you probably do not have to buy life insurance. The same is true if you are alone and have no other family that must be taken care of when you have to leave.

Strange as it sounds, the reason for this is very simple. Life insurance products and plans are not designed to place a guarantee on your “life”.  They are products meant to ensure that a future financial risk will not have to befall your partner and your children, people you will leave behind when you die.

When you are facing retirement age and there are no financial loss that is potentially faced by heirs (or you do not have them, in the first place), then it is better for you not to buy life insurance.

If that is the case, then when is it advisable to secure a life insurance plan? You are a prime candidate for a life insurance when:

• You are one half of a couple in your prime years, still saving up for your retirement years;
• You are a retiree and your death can cause a corresponding loss of income stream for the family you will leave behind;
• You are a parent with young children;
• You belong to a family with a large and illiquid estate that is subject to huge estate taxes; and
• You are a business owner, or a key employee in a business.

Depending on which scenario you are looking at, when you belong to any of the mentioned categories above, then it is important for you to buy life insurance product to decrease or eliminate the potential for financial loss by the family you will leave behind.

How will you determine which insurance coverage you should purchase?

If the financial loss that you have identified is only limited to the interim years between now and your retirement, then your risk is decreasing as you approach retirement, when your savings and investments are increasing. This means that you only require coverage for potential financial loss during the time that you have not yet reached retirement; in such a situation, it is best to go for term life insurance which will cover you for the identified period.

However, if you have a successful practice or business that can potentially be subjected to huge estate taxes upon your death, then you must opt to go for a permanent insurance, or whole life insurance that will kick in action when you die and provide a cash stream for the family to pay off the estate taxes and insure them against financial risk. Whole term insurance is also your best bet if you wish to be sure that the coverage will pay out.

Those are simple rules to guide you when you think about financial preparations for your retirement years. Remember that retirement does not automatically dictate that you procure life insurance policy. Your financial situation and need will dictate it, not your age.

Life Insurance Scams to Watch Out For

Life Insurance Scams to Watch Out For

In the movies, you see how someone gets away with millions of dollars and get to spend retirement years in the Caribbean after an elaborate plot of staging his/her own death. In real life, the true victims of life insurance scams are people just like you and me.

Some of these scams are minor irritants that you can immediately correct once identified, but other scam scenarios can become serious if left unchecked. Here are some examples of the things that you should be on guard for:

Unknown Billing

You check the dental or medical billing you receive, and a service you never had pops up – this item can be insignificant singly but an accumulation eats away at your privilege. In order to eliminate this, ensure that you regularly check the billing statements that are provided to you. Remember that fraudulent listing like this can increase the premiums you are paying to continue receiving your medical and dental benefits.

Inflated claims

Just like unknown services that suddenly crop up in your bill statements, inflated claims refer to either padded up claims listed or exaggeration of damages (if you happen to be talking about car accidents and such). An important rule, especially in the case of automobile accidents, is to have the proper authorities (read: the police) document the entire accident and the damage details to ensure that everything will be transparent and recorded.

Unwanted solicitors

These refer to people who, under the guise of helping out, will direct you to professionals who offer legal and medical help (of course part of the scam), for a “referral fee”. Under the coverage you have, you should not have to eke out additional cash such as a referral fee to enjoy the services that are automatically granted by your insurance policy.

Those are just some of the fraudulent activities that can befall insurance policyholders like you. Thus, it is important to be aware of simple guidelines in order to avoid falling victim to these scams. Here are some tips to enforce awareness and knowledge on your plan:

Know the basics and the market.

Even before you sign up and pay for a life insurance policy, make sure that you are aware of the things that go in to determine the premiums and the coverage you pay for. A simple understanding of this basic information will arm you with the proper knowledge so that you will not have to experience unnecessary hassles with your insurance plan. At the same time, do not just settle for the first insurance firm and package you see – compare the plans and the companies. Do not tie yourself to paying high premiums when there are cheaper but competitive plans around.

Know the company and the people you deal with.

Buying insurance is not a simple cash transaction. When you purchase insurance, you are giving a portion of hard-earned money to someone who will use it to ensure your family’s coverage from financial risk. Make sure that you are giving your money to a trusted company or person – know the insurance firm and the agent you are dealing with.

Read the fine print.

Do not leave everything to the insurance agent – read your policy, including the fine print. Ensure that you know what comes with the coverage and what does not. This will save you from making unnecessary assumptions – why assume when you can assure?

Check your bill.

Your premium is normally a regular amount that does not increase. In the event that the bill changes, contact your insurance company immediately.

Those are things that you should practice to ensure your personal protection. Be alert because this is your money and your family’s future security that we are talking about.

Life Insurance Riders

Life Insurance Riders

There are times that your insurance coverage is limited due to the policy set by the insurance company. If you want to increase your coverage, you will need to buy life insurance riders, which are additional benefits that policyholders can buy and blend based on their present and future insurance needs. But buying these riders means paying an extra premium, although the latter is generally lower because there is only little underwriting that is required.

Below is a list of the most common insurance riders that can be purchased:

1. Guaranteed Insurability Rider (Renewal Provision)

This rider allows customers to purchase additional insurance coverage together with their base policy in the period that is stated in the policy without the need for additional medical examination. It is very advantageous, especially when there are significant changes in your life circumstances, like childbirth, marriage, or income increases. When your health state declines because of aging, you will be able to apply for extra coverage without showing them any evidence of insurability.

2. Accidental Death or Double Indemnity Rider

This rider is an additional amount of death benefit if the insured dies due to accident. In this case the family of the insured gets twice the amount, thus, the name double indemnity. This rider is ideal for those who are the sole income provider for their families, as this will double the benefits that beneficiaries will get.

3. Spouse Insurance Rider

This rider offers term insurance for your husband or wife.

4. Waiver of Premium Rider

In this type of rider, future premiums are waived off if the insured becomes permanently disabled or loses his/her income because of injury or illness prior to a specified age. In this case, the rider exempts the insured from paying the premium until he/she is ready to work again. But it is important to become aware of the definition of “totally disabled”, as this may vary from one insurer to another.

5. Family Income Benefit Rider

Under this rider, the rider provides a steady flow of income to the family members if the insured dies. When buying this rider, it is important to determine how long family members are going to receive the income benefit.

6. Accelerated Death Benefit Rider

If the insured is diagnosed with a terminal illness, thus, possibly shortening his/her lifespan, the insurance company may advance 25-40 percent of the death benefit. It is important that the insurer subtract the amount he/she receives, plus the interest from what his/her beneficiaries may receive. Just like with the waiver rider, different companies have their own definition of “terminal illness.”

7. Child Term Rider

This rider provides a death benefit to a child in case he/she dies before a predetermined age. This term plan can be converted to a permanent insurance once the child attains maturity .

8. Long Term Care Rider

This rider offers monthly payments in case the insured stays in a nursing home or receives home care due to unfavorable health.

9. Return of Premium Rider

The aim of this rider is to give back to the insured most of the premium that he/she has already paid. At the end of the term, the premium will be returned in full to and in the event of death, the beneficiaries get the premium.

Since most insurance companies will not give their members the liberty to modify  the latter’s insurance policies, a rider is then important since it empowers insurance plan holders with the control they need in their ever-changing life situations.

Life Insurance Ratings

Life Insurance Ratings

There are hundreds of insurance companies out there. Almost all of them are bear the name “American”, “National” and “Safety”. So which of these insurance companies are you going to choose? Are you just going to base it on the name, its advertisements or its financial strength? If your basis for choosing the best insurance company is its financial strength, then you are on the right track; you just need to check on the life insurance ratings of these companies.

Life insurance ratings are essentially letter grades assigned by insurers based on the company’s financial strength. These ratings are important as these are assurances that the company will be able to pay you once you file for a claim.

Life insurance ratings are given by independent services based on an insurance company’s financial strength. These ratings are determined by independent analysts who are paid to do a review of the company’s financial strength.

If the company receives a relatively poor rating, it might mean that it may not be able to deliver on time a payout to a customer who has always paid his/her premiums. That is why a company’s rating is more important than its customer service, policies, and premiums. None of these things will matter if the company goes bankrupt.

Some of the leading life insurance ratings companies are A.M. Best and Company, Standard and Poors, Moody’s Investor Service, Fitch, and Weiss Ratings, Inc. The ratings are just like the grades in school with A being the highest, then B, and so on. Of the five ratings companies, A.M. Best  is the oldest, it being established in 1899. It was named after an agent who was frustrated at the lack of financial information about insurance companies. A.M. Best has developed a ratings system for life, general and reinsurance companies on the basis of the company’s strengths and weaknesses.

The ratings are as follows:  A++ or A+ (Superior), A or A- (Excellent), B++ or B (Very good), B or B- (Fair), C++ or C (Marginal), C or C- (Weak), D (Poor), E (Under regulatory supervision), D (In liquidation), and S (Rating suspended). A B+ rating or better is an indication that the company is secure in four critical areas which are underwriting, expense control, reserve adequacy, and investments.

Almost all companies get an “A” in one form or another. A company which has a life insurance rating of B or lower should not be considered. So, before making that long-term commitment to a specific life insurance company, it is very important to check out first its financial rating. Good thing that this information is available in the company’s website. It is also advisable to check the ratings in other sources.

If there is an agent selling you a life insurance then you asked him about the company’s life insurance rating and no answer was given or he is not knowledgeable about it, you should see a red flag unfurl. If he/she happens to know the ratings, you may ask the agent to explain these things to you in simpler terms.

Life insurance rating is very important – and it is more important to research on this with multiple sources now than being sorry later on. Also, the life insurance company should at least be rated by three of the five rating services and should have one of the three of its top ratings or at least two of those services. There should be no rating that is below the service’s fifth best score.

Life Insurance Prices

Life Insurance Prices

Shopping is a timeless art. It is an activity that requires patience and skill – expert shoppers take pride in buying the best quality commodities at the lowest possible prices. The same is true about buying life insurance.

When buying an insurance policy, it is important to check out and compare prices among insurance companies. Most companies offer the same range of products; however, price ranges differ, including additional perks to make company offers more attractive to the consumers.

Another thing to consider is that per plan, there is an average industry standard price in the market. As a consumer, you can get a quote of life insurance prices online and/or with your insurance agent or broker.

As an existing or potential policyholder, you have the privilege to ensure that the plan you have secured for yourself offers you the best features that fit your requirements, and provides the lowest premiums that you can afford.

Of course, finding the perfect mix of best features and lowest cost in an insurance coverage may be tough, but there are tools that can help ensure that you have shortlisted some of the best plans you can get.

A quote of the life insurance prices in the market can also provide you valuable information about the stability of the insurance company, and the products that they offer. Especially for firms that belong to the same grade market and target the same customer base, deviant rates are always subject to closer scrutiny – why would these firms deviate from the industry standard rates? Are they multinationals with years of expertise and financial stability to back them up? Or are they new and unknown term companies that are new to the insurance industry?

These are the questions that you no longer need to ponder on continuously. Online insurance price quotation engines can assist you with all your inquiries for different insurance companies with just a few clicks on the keyboard.

Researching information on life insurance prices need not be an arduous task that can eat up on your precious time. With technology, finding out the answers you need is easy. And with the help of quote engines, you can automatically compare companies with one another.

If you have decided on the type of coverage that you want but are unsure because of the life insurance price, make doubts disappear by performing a simple request for quotation. Once you have the information that you need, you can try checking out the details of the plans online or with the help of your insurance agent

Do not make a hasty decision to buy a product when you are unsure of the information about it. Make certain that you understand everything and all the premiums that are required before you make a decision.

Buying life insurance is part of your preparation for the future and retirement. Do not be hesitant in asking for information on life insurance price and other details. Be sure you know where your money is going.

Careful and strategic financial planning is one tool that can help you prepare for your future. Make sure to exercise sound financial judgment and you will definitely have a secure financial future to look forward to with your family.

Life Insurance Medical Exam

Life Insurance Medical Exam

If you are applying for a life insurance plan, chances are, you will be asked to take a medical examination.

A life insurance medical exam is just one of the requirements most comprehensive insurance policies need from the prospective policyholders. Insurance companies use the results from your medical exam as additional inputs and factor them in gauging your eligibility for a particular policy.

However, medical exams are not required all the time. Basically, it depends on the type of insurance solution that you are gunning for.  There are three kinds of insurance policies: guaranteed, underwritten and simplified.

A guaranteed policy neither requires you to take an exam or answer questions; you automatically get provided with the plan without any requirement for your personal details. An underwritten coverage entails the customer to be subjected to a medical examination and to be asked about his personal and medical history. A simplified insurance plan requires the customer to answer some questions regarding medical background but no physical examination is required.

But what is the effect of taking a life insurance medical exam?

If you are one of those people who have no qualms about taking the medical exam, and acing it, then you will have the opportunity to be the recipient of the plan that you have been angling for without any worries. The results of the exam validate your good health and ensure that you will have access to the plans you want and at the best and competitive prices, too.

One the other hand, although simplified and guaranteed plans are available to you, they more likely have a higher premium because the insurance company may be of the opinion that your reluctance to participate in a medical exam simply means that there is something about you (or your health) that you do not want to come out. You will still have the opportunity to enjoy the protection that you want but the cost may be considerably higher.

So if you do not have any health-related issues at all, it is better for you to undergo a physical exam in order to optimize the range of products that is available to you.

Once you have decided to go for the exam, the insurance company will arrange for an independent and licensed paramedical who will perform the medical examination on you and who will also be the one to interview you regarding your medical history and background – at your convenient schedule and in the comfort of your own home.

The paramedical brings all the required kits that at no costs because the bill will be footed by the insurance firm. A standard medical exam includes getting your height and weight, pulse rate, blood pressure, urine and blood samples and other items that depend on the particular life insurance company.

When preparing for your medical exam, ensure that you have a good night’s sleep just before your exam; refrain from imbibing alcoholic beverages the day before your big event; and avoid taking in too much salty or sweet foods. Most important, do not engage in activities that can tire you out, for you must be energetic and prepared for the tests that will be performed during the visit.

Your test results will basically provide two important pieces of information to the insurance providers – validation of your good health and responses to the interview, and a peek into your current medical condition.

If you declared yourself as completely healthy and your results show nicotine contents or some other abnormalities in your system, then the insurance company can decide to give you the coverage you wanted but at a higher premium.

However, perfect health will ensure that you will get your coverage without any problems whatsoever. If you get negative results, you will probably be denied and you may have to look for another company that carries higher risks at higher premiums.

If you are truly serious in your desire to have the best coverage that insurance can provide at lower premiums, why not try to undergo a medical exam? At least, you will get a shot at more comprehensive plan features that are not offered to individuals who are not open to being examined by a paramedical.

Life Insurance Income Tax

Life Insurance Income Tax

One strong selling point of life insurance is the exemption from tax that some insurance companies declare. However, what does an insurance tax exemption mean and how will it impact the proceeds of a policy?

Most people believe that one of the desirable characteristics of life insurance is that its benefits are exempted from tax. This means that the pay out to the family of the insured will not have tax deductions. However, if you are thinking of buying an insurance policy, you must understand that taxes on benefits will depend on the policy being tax-exempt or non-exempt when it is still being paid by the insured.

In insurance circles, there is a particular subject touching on taxation that has to do with either the “old rule” or the “new rule”. Insurance policies that are issued before December 2, 1982 are under the old rule and enjoy exemption from accrual taxation, while policies that are considered under the new rule can either be exempt or non-exempt.

An insurance plan can be considered as non-exempt when it offers an additional benefit such as annuities. Non-exempt insurance plans have tax deductions that will have to be paid either yearly, or every three years. When an insured person who has a non-exempt insurance coverage dies, investment income that will be coming from his policy will still be considered as taxable income. In the case of an exempt insurance policy however, the benefits at death are non-taxable.

In the event that you will be converting or transferring policies in the future, ensure the compatibility of the tax status of the policies because any incompatibility can result to a tax that is very expensive. In addition, it will be best to check with your broker, agent and the company where you have your policy, regarding their guidelines on the taxation of life insurance plans.

The advantage of owning a life insurance is that you have the opportunity to generate a considerable amount of money for your beneficiaries after your death. And the good thing about this is that when the money is paid to your heirs, the cash value is free from income-tax deductions. However, note that although income-free, the sum can still be subject to tax since it is part of your estate.

One way or the other, there may be deductions that your insurance proceeds will have to take because of federal rules and regulations. The important thing to remember is that thinking from a business point of view, you must make smart financial decisions in investments and financial planning. These include the details of your policies such as naming your beneficiary as a real person instead of naming it after your estate in order to avoid any additional hassle or worries on the part of your heirs. Do all these so that when the time comes for you to leave everything behind, you can go with the reassurance that your loved ones will be left behind with a financially secure future.

Life Insurance Health Questions

Life Insurance Health Questions

One way that insurance companies can help assess you and provide you with a list of their products is by using life health insurance questions that are designed to ascertain your current lifestyle and health habits.

Insurance companies use these simple life insurance health questions instead of medical examinations as part of your requirement in buying an insurance policy. A lot of people prefer this simple and straightforward measure of their qualifications for a particular coverage rather than the equivalent physical testing that can be quite cumbersome.

Life Insurance health questions can range from simple questions that include physical details such as height, weight, and gender, as well as questions answerable by yes or no such as tobacco use, existing medical condition and hazardous jobs. Answers to these questions become the basis for qualification to a particular program or plan that you are interested in.

Of course, these queries are generalizations, meaning, when you consult with the agent, the information you provide can give them a faster assessment of your pre-qualification, but they can still offer you potential products that are not related to the results at all. In the end, the product that you will go for will depend on your preferences, willingness to meet the premiums and other details of the policy.

Does this mean that life insurance health questions are insignificant?

Life insurance health questions remain a reliable tool, even when they do not provide the full health and lifestyle information about an individual. As with other situations in real life, these health questions are used as a gauge – an assessment tool of your current habits, and capabilities. At the same time, the result provides the insurance company with a potential overview of the risks that are posed by your lifestyle to untimely demise, which will ultimately affect the finances of the company who will be shelling out the coverage benefits to your family and loved ones.

Note that in policies that cover critical illnesses, the insurance company may require you to take a medical exam even when you have filled out a health questionnaire. The reason for this is that pre-disposition to these illnesses will already make the company liable to pay out for the benefit in the event that you contract the illness. Thus, companies would want to know beforehand if you have existing conditions that can lead up to these illnesses. Such a scenario can also have an effect on the premiums of the policy or make it harder for you to get a particular type of coverage.

Insurance companies will require plan applicants to have good health. For the insurance company and in general, the term good health would refer to non-application of maintenance medicine for physical conditions or illnesses, non- heavy smoking and non-absence from work (for lengthy periods, like around two weeks) that can be attributed to a health condition.

These basic requirements even out the playing field for companies because like us, they also aspire for minimal financial risk. If you were in the insurance business and most of your clients were dying in succession and within their plan coverage, this would mean that you are required to provide the pay out on their policies to their families. This would mean that as a business, you could lose a lot of money.

Does this mean that people with handicap and those that suffer from chronic issues like hypertension cannot get coverage?

No. Getting an insurance coverage is just like getting a health card – it is a right that everyone willing to make the premiums can have. However, to balance the odds, insurance companies also have the right to raise premiums for a particular coverage, based on factors that also pose a valid financial risk for the business. This balancing act is required in order to make the general situation fair for the insured and the insurer.

So if you are planning on getting insurance, ensure that you answer the life insurance health questions as accurately as you can. Do not think that these questions are irrelevant; your agent will be basing your assessment on the answers you provide. Give accurate information and be rewarded with more focused products that the agent will provide to fit your short- or long-term life goals.

Life Insurance as an Investment

Life Insurance as an Investment

Today, more people are becoming interested in getting insurance as part of financial planning tool. Compared with the earlier years, some people think of getting insurance as a necessity that must be met to ensure financial security of the family. With the various insurance products pervading the insurance market, people are buying life insurance and making it part of their investment portfolio.

But, what is a financial investment and does life insurance fit the bill?

Investments are assets that are paid for and that provides the owner with a potential for financial or monetary gains. Normally, people can make investments, like buying real property, gold or stocks – commodities that are often viewed to have a potential for further growth that can result to capital gains.

Life insurance, on the other hand, is a policy that provides a cover to the insured individual for either a period of time (term insurance) or his entire life (whole life insurance). The primary goal of insurance is to provide financial protection. This implies the mitigation of financial risks that are posed by an untimely death, and clearly indicates that the protection is primarily enjoyed, not by the insured, but by the insured’s family or loved ones.

When you buy term insurance coverage, you pay premiums for death proceeds for a period of time. Normally, term insurance does not have additional cash value features, thus, marking it as a purchase, and not an investment. Permanent life insurance provides you with protection for your entire life and provides you with an additional incentive of a cash value. On the surface, whole life plan premiums are more expensive than their term counterpart but over time, the payments for the permanent insurance can become much lower.

However, an attraction of whole life plans is that they can provide the insured with an ‘accumulation account’, a cash investment that is set up by the insurance firm for the insured person. This account is tax-deferred – taxes are postponed and not deducted from the income as the gains from the investment grow over time. This feature becomes more valuable when the insured person belongs to a higher tax bracket.

The disadvantage of life insurance, when viewed from a perspective of an investment, is the high fees and costs that are associated with getting one. This is the reason why more people will more likely invest in mutual funds than get policies that provide cash accumulation.

At the same time, some people prefer to invest in tangible things with gains that they can hope to experience in their lifetime, not only leave investments that only benefit their heirs.

These are some reasons that can either motivate you to buy a life insurance as part of retirement or financial planning and investment, or dissuade you from getting one. There is no one sure formula to declare that insurance is an investment or a potential liability for an individual.

The choice whether a life insurance plan can be advantageous for you or not depends on your prevailing health and financial situation at a given period, as well as your long-term plans and goals. So check your status and your options and work on that list of goals you are aiming for. Only you can best decide whether or not getting insurance is a good financial investment for you and your family.

Life Insurance Trust

Life Insurance Trust

The main purpose of setting up a life insurance trust is to have a designated owner for the life insurance policy. In cases where the insured person is the owner of the policy, the proceeds are subjected to estate tax when he or she dies.  Why is there such a concern regarding estate taxes?  This is because the current rate is 45%, that’s why.  Beneficiaries could stand to lose thousands of dollars in estate taxes and since times are tough, many dependents would rather use the cash for their own family’s needs.

This is not the case when there is a life insurance trust that is set up.  All the proceeds are to be exempted from both estate and income taxes.  However, getting a life insurance trust should be done with caution because there are also disadvantages in this type of set up.

The insured party will no longer have the right to change the beneficiary since the trust itself, is equivalent to the receiving party. The insured person cannot act as the trustee of his own life insurance policy, as aforementioned due to estate tax. Only the designated trustee, who is another individual or party, has the right to designate trust beneficiaries.  This designation is permanent once the trust has been created.  It does not leave room for any flexibility should family circumstances change.

Another prohibition is for the insured person to be able to borrow against the policy. If the policy is not under a trust, most insurance providers allow the owners to loan an amount from their policies.  However, upon creation of the trust the insured person no longer owns the policy.  Thus, the insured person has right to take a loan on it.

Before the policy gets exempted from estate tax, the transfer of ownership must take place at least three years prior the death of the insured party.

This is the government’s requirement in order for the trust to be recognized.  If the insured party does survive for three years, the cash value of the insurance policy has grown with interest and can have a gift tax that is a collectible amount by the government.  The best scenario is for the trust to apply for a new policy on the insured person’s life.  Although he or she will not be able to own it, there won’t be a cash value build up, in turn, no taxable gift will be made.

Trusts are irrevocable.  Once they are created, the policy cannot be returned to the original policy holder who is the insured party. A lot of banks and trust companies offer low fees if one would be interested in hiring them as insurance trustees because there are essentially no risks involved.

Despite the seemingly troublesome nature of an insurance trust, many people consider it to be worth all the hassle and cost.  These citizens believe that their life insurances policies are great assets to leave behind to their loved ones, especially if the full amount of the death benefit could be taken advantaged of.