Life Insurance Lowdown

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. 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).

I don’t think you can disagree with me if I say that today you can get a life insurance policy at the price of peanuts. Life is indeed getting cheaper. Longer life expectancies and improved technology are other factors that have brought down insurance rates. Insurance companies have also become more efficient at collecting information and assessing potential candidates.

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!

The funny thing is that while it becomes increasingly difficult to keep yourself healthy thanks to increasing health insurance policy, life insurance has become cheaper. And most insurance firms are not sure how long this downfall will continue! Just look at these figures: In 1990, a healthy 40-year-old man would have paid $1,405 a year for $500,000 in insurance for a 20-year period. That same policy now costs less than $400!

If you are healthy, you could save money by replacing the older insurance with a new 10-year term policy for $525 a year or a new 20-year term policy for about $1,000 a year. The savings are even higher for policies for $1 million or $2 million in coverage. However, about 24 million U.S. households have no life insurance, according to recent research. Consumers cite a number of reasons for not taking insurance including plain laziness, confusion and concerns about cost. And nearly 20 percent say it is ‘unpleasant to think about dying’!

William McCullough from Brooklyn, recently pleaded guilty to masterminding a scheme in which a small network of co-conspirators pretended to have dead relatives in order to collect more than $500,000 in life insurance payments. McCullough is supposed to have operated this scheme in collusion with his stepfather, Michael Brant, 42, who worked for Prudential Insurance as a group life claims examiner. App.com reports:

Starting in December 2000, McCullough devised a scheme to defraud Prudential by submitting false life benefit claims from AOL Time Warner employees who were not dead. McCullough and Brant recruited five additional people from their Brooklyn neighborhood to serve as the beneficiaries on fraudulent group life insurance claims to Prudential, the indictment states.

Read more: Man admits to life-insurance scheme that netted $500G

Quite a few people find the idea of life insurance distasteful. What you should realize is that it is essential in protecting the fiscal health of your spouse and children should they find themselves fiscally taxed due to your death. Bestsyndication.com reports:

There are some important things to consider when buying a policy. Be sure to shop around before buying life insurance. Consumers can buy insurance directly from an insurance company via the Internet or over the phone. Buying this way is usually cheaper than going through an insurance agent because the agent receives a commission, called a “load,” when they sell a policy.

Read more: Does Term Life Insurance Make Economic Sense?

This is a simple way of looking at insurance — think of it as a compulsory saving. Something that you need to set aside regularly so that if some unforeseen disaster occurs, you and your family are prepared. After all, it is by saving that you can keep something aside for a rainy day.

I know this sounds more like some gramma’s advice, but believe me, when I say that life insurance is the best form of savings especially for people belonging to the lower-income groups. Some people actually believe that life insurance is one of the greatest financial innovations the world has known. Life insurance has become one of the greatest mobilizers for savings and for very good reasons. It is a comforting assurance in the face of so many risks and unknowns. Jamaica-gleaner.com reports:

Notwithstanding the huge preference and key advantage which life policies would hold in the expenditure of the consumer dollar, armies of sales teams, or underwriters, become experts in pressing home the value of purchasing life insurance cover.

Read more: Saving is where it all begins

Is life is getting cheaper? It would seem so as aging populations, the Internet and a number of other factors force down the cost of term life insurance. And yet, most Americans don’t seem to be taking advantage of this great windfall. Theledger.com reports:

If that person is healthy, he could save money by replacing the older insurance with a new, 10-year term policy for $525 per year or a new, 20-year term policy for about $1,000 per year. The savings typically are even higher for policies for $1 million or $2 million in coverage.

Read more: Life Insurance Now Cheaper Than Ever

Term life insurance is life insurance at its simplest. When you opt for term life insurance, you should know that it is temporary in nature and covers only a specific period. If you insure yourself for a particular period and you die during the policy term, then the death benefit will be paid to your beneficiary. Once the term expires, the insurer usually does not have to pay out. This is the main reason why term insurance is extremely inexpensive when compared to life insurance.

While term life insurance policies do have their limitations, it still is the best option for people with limited means. Your term life insurance policy offers coverage to pay a death benefit, which is usually income tax free, as long as the policy is in force and premiums are current.

When you are trying to assess policy cover, it is important to know the different types of term. Annual renewable term (ART) allows you to renew your contract each year without a medical exam. In such policies, the premium may increase each year.

Then there is the guaranteed level premium, which can start with a higher premium than the ART. The benefit of this type is of term policy is that you can lock in that rate for around 10 to 20 years. Once this period is up, you may have to take another medical exam and buy a new policy. Here are a few things you ought to keep in mind when finalizing your term life insurance:

• Ensure that you buy enough life insurance to meet your needs. Don’t skimp; term life insurance is extremely affordable. You must match the term to your needs.
• When you purchase a term life insurance policy, you must ensure that your dependents are covered until such a time that they can provide for themselves.
• Use the calculators provided on various websites like InsWeb.com to know how much to insure yourself in order to ensure that you have covered your dependents well.

Here’s some good news for members of the Rhode Island National Guard. Under legislation signed recently by Governor Carcieri, the members would be eligible for higher life insurance reimbursements. Eyewitnessnewstv.com reports:

The legislation would increase life insurance premium reimbursements for any members of the National Guard who have been mobilized for more than 30 days.

Read more: National Guard members to get higher life insurance reimbursements

Is your life insurance a necessity that must be paid for by any means? I really don’t think so. 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 past your prime — that would be around the age of 70 and above. 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.

Here’s a bit of news that will cheer nearly 25,000 minority North Carolinians who now stand to benefit. The North Carolina Insurance Department recently announced a settlement with Western and Southern Life Insurance Co. Myrtlebeachonline.com reports:

A multistate examination led by Ohio insurance regulators and involving North Carolina officials, found that the Cincinnati-based company charged higher premiums to black customers for life insurance, industrial life insurance or monthly debit ordinary insurance from the 1950s through the 1970s.

Read more: Settlement with insurance company announced