Life Insurance Lowdown

Life insurance has its beginnings with providing the proverbial ’safety net’ for the family. However it’s meaning and utility has undergone a lot of change in the recent years. In the 21st century one of the most important issues is to find a means to deal with a constantly changing and uncertain economic climate. What it implies therefore that now more and more families want to make provisions for paying current bills, as well as planning for future events and changes in their lives. Providing college educations for children and comfortable retirement incomes for themselves are just some of the things that they want to do apart from leaving behind handsome cash for their dependents.

Variable Life Insurance may therefore be just the thing that you have been looking for. Variable life insurance guaranteed death benefit. And at the same time while you are alive, it will grow on a tax-deferred basis and become available to you via policy loans or withdrawals when you need funds.

A new way of making good money out of life insurance has come to light. One that is not technically illegal but does not fall under the purview of being legal too!

Off late some senior citizens are being urged to late out a life insurance policy as large as $ 1 million or more. The kind benefactor loans them money to pay for the first two installments. After this the senior is expected to sell the life insurance to the person who gave him the money in the first place. This he does gladly, since he is being offered a sum equivalent to 1% of the $ 1 million that he is insured for. After this the buyer of the insurance sits back and waits for the senior citizen to ‘die’. After the death, the new owner of the insurance becomes the recipient of the $ 1 million for which the senior was insured. 

The senior does have the option to keep on paying the yearly premiums and maintain the policy but the sheer size of the premium prevents him from doing so. And he is therefore quite happy with the 1% that he receives for his ‘work’ that roughly translates into $ 10,000.

I wouldn’t be too off the mark if I said that today you can get a life insurance policy at the price of peanuts. Life is indeed getting cheaper and aging populations, the Internet and a number of other factors in recent years have forced down the cost of term life insurance.

However, the good news doesn’t seem to have reached a majority of Americans. There are quite a few people still holding on to more expensive policies that they bought years ago or they many not have insured themselves highly enough. According to experts, the salary that many employers offer their staff isn’t enough to leave dependents. The paradox here is that though it is cheaper than ever to complement their coverage with other policies, not enough people are doing it! Heraldnet.com reports:

Mike Kalen, executive vice president of Hartford Financial Services Group Inc.’s individual life division, attributed the decline to a number of factors, including longer life expectancies and improved technology. Insurance companies, he said, have become more efficient at collecting information and assessing potential candidates.

Read more: Many pay too much for life insurance

Life insurance has become a necessity in today’s life. But it is not so much of a necessity that a man in his late 70s should have to pay through his nose as insurance premium. That’s exactly what happened to an elderly gentleman who is into his early 80s. Twenty years ago when he was working, he took a life insurance policy, which seemed a bargain — he had to pay his premium for a few years after which it would build up enough value to pay for itself. While the going was good for over a decade, now suddenly this person finds out that he is being forced to pay a huge amount as premium. He is now retired and doesn’t have the means to pay such a large amount of money.

If I were in his position, I’d dump the policy. I know some people think of a life insurance as an absolute necessity. But believe me, it is not always a good thing to have. Especially if you are in the old man’s shoes. If you can afford it, life insurance is a great idea and allows us to help provide for those we love. But in case of people who are retired, the rules change a bit.

You insure yourself to ensure that your family gets some form of income even after your income has stopped. But in the case of a retired person, his/her income comes from Social Security, savings and possibly a pension. So, it is safe to assume that the death of this person will not affect the standard of living of his survivors. In such a scenario, you really don’t need a policy that is milking you dry.

Life insurance is not something you would like to think about in your free time — unless of course you work in the business. As for the rest, most people generally tend to think about them only when forced to, like the time when they come up for renewal.

But it pays to give your policies a checkup when they come up for renewal. Just as when you first buy a policy on your life, you need to ensure you have the right amount of coverage at the best price. So, what should you look for when updating your policies? How you update your life insurance depends on what type of policy you have. For term life, do a quick comparison of premiums to see if yours are still competitive, especially if your insurer raises them more than you expected.

While quite a few people opt for term life insurance policies because of the financial benefits it offers, there are quite a few who would still prefer to go in for permanent life insurance. In case you are one of those, you could try universal variable life as an option. Elderlawanswers.com reports:

As the name suggests, variable universal life insurance combines the flexible premiums of universal life insurance with the investment choices of variable life insurance. There is no guaranteed minimum cash value, but most policies have a minimum guaranteed death benefit provided you pay the premiums for a set number of years.

Read more:Choosing a Life Insurance Policy

Have you ever thought of selling cash value life insurance as an investment? You probably need to think again because according to experts, this is a very foolish thing to do. Elpasotimes.com reports:

A cash value life insurance policy isn’t an appropriate vehicle to pay for children’s college expenses. The suitable vehicle is an asset-allocated mutual fund as an education IRA. Children need just enough life insurance to pay for a funeral, which can be purchased as a child term rider on a parent’s term life insurance policy.

Read more: Don’t think of whole life insurance as savings

It’s one thing to say that you can get competitive rates for term life insurance policies and another to actually find a firm that offers the most competitive rates It is imperative that you shop around, since companies structure rates and guidelines for term life insurance uniquely. Here are a few tips, which if you follow, will help you find the best term life insurance quote:

• The Internet is your best bet when it comes to searching for and collating together a list of insurance firms that offer term life insurance.
• Secondly, whittle down this list to the handful that offer competitive rates.
• If you want a tentative idea of how much you’ll need to shell out, check InsWeb.com. The website offers quotes from a remarkable database of insurers and can give you a more or less accurate picture of the premium you’ll need to pay.
• Now you can compare the rates again and cull your insurer’s list further depending on their individual quotes. Once you’ve checked the financial ratings of these insurers, it is time to call them up and know more about the policy on offer.
• If you feel that the insurers on your list are not offering competitive term life insurance quotes, then try calling an independent insurance agent before you call up the insurance firms. Find out if the agent can beat the quotes on offer from the firms. Don’t worry; the premiums will not cost you more because you approached an agent, and they may even be able to offer you more competitive quotes than the companies.
• If you feel that you need personal contact, then don’t hesitate to find yourself a good agent rather than approach the companies yourself. However, it is important that you find yourself a good agent. A good idea would be to look for agents who have the designation CLU (Chartered Life Underwriter).

Getting a life insurance policy involves going in for a physical — something many people don’t like and get quite nervous about. If you belong to that category, you’d probably be interested in buying a life insurance policy that doesn’t require a physical exam, but be warned, you could be making a huge financial mistake. Wgtndailynews.com reports:

"While it may be more convenient to buy insurance that way, it will cost you a fortune in the long run," says Byron Udell, founder and CEO of AccuQuote, a Web-based company that offers free online insurance quotes. "These policies are significantly more expensive than their fully underwritten counterparts because the insurance company isn’t being given the opportunity to really evaluate its risk."

Read more: Life insurance Without an Exam Not a Good Idea

You may think that what I’m going to say is unpleasant. Have you thought of taking a life insurance policy in your child’s name? Let me be plain here: I’m not talking about the chance of your child dying. This is not something parents want to think or talk about.

Many people believe that life insurance is necessarily all about death. That’s not the case here. Child life insurance is about preparing for the future; taking steps today can help create a better tomorrow. And as parents or grandparents, it is our duty to make the future better for our children. Compuquotes.com reports:

Such child life insurance is perfect for planning for the future because of the cash value the plan would accumulate. As an adult, they could borrow against this value…or stop the policy and withdraw the money (to pay for college or any number of things).

Read more: Child Life Insurance