Life Insurance Lowdown

–By Priya Jestin, Staff Writer

Do you have heavy financial obligations like a big credit card debt or mortgage loan? If yes, then do go out and get yourself a life insurance policy. People with heavy financial obligations can use life insurance to ensure that their debt is covered. Life-insurance death benefits are exempt from federal taxation. So, many financial planners use clients’ life-insurance benefits to help pay for the estate taxes generated upon the death of a loved one.

It is important for you to determine the duration of coverage is important. This will help you ensure that you get the right type of policy for you and also that you keep the premium payments affordable. One way to do this is shop around and get rates from multiple insurance companies. Finally, ensure that your insurance carrier has the financial stability to pay your claim in the event of your death.

–By Priya Jestin, Staff Writer

While each individual policy may be different depending on the policyholder’s needs, there are certain factors that remain constant and affect your life insurance costs. A while back I had written about how your cholesterol level can actually affect your insurance rates. Cholesterol isn’t the only factor taken into account when deciding insurance rates. Your weight and blood pressure are the two other very common factors that can have a great impact on your life insurance costs.

So why do life insurance companies place blood pressure on such a high pedestal? Well, for one, if you have high blood pressure, it could lead to further complications. Like high cholesterol, high blood pressure can lead to heart disease and other health problems. This in turn may put you at risk for higher life insurance costs.

Your gender and age are some of the factors that determine your blood pressure and cholesterol levels. Normal adult blood pressure is generally identified as 130 over 85. You have hypertension (high blood pressure) if your blood pressure is at or above 140 over 90. A blood pressure level at or slightly above 140 over 90 is regarded as low-grade hypertension. Most insurance companies have levels they consider acceptable, and other levels they consider preferred (which may qualify you for discounted rates).

Now, your blood pressure levels alone will usually not raise your life insurance costs. But combined with another underwriting factor (such as cholesterol or obesity), hypertension is likely to raise your costs. Moreover, if your blood pressure is dangerously high, this may be reason enough to raise your rates.

This doesn’t mean you need to despair if your blood pressure levels aren’t normal. Many people respond well to medications that help lower their blood pressure. If you have managed to lower your level, your past higher level should not affect your life insurance costs now.

I know this bit of news comes all the way from UK. But the crass denial of basic rights to patients… cancer patients, had me fuming, and well, I couldn’t go on without writing about it. Thousands of people suffering from cancer are being denied insurance in the UK. This, despite the fact that medical advances have increased survival rates dramatically.

Many of these sufferers are not even being allowed to take a life cover and other forms of insurance. This puts their homes at risk AND causes needless distress. The situation is particularly acute for women with breast cancer, who are being overcharged for cover by as much as £36,000 over the life of a policy. Telegraph.co.uk reports:

"Insurance companies are not always taking the impact of new medicines into account," Anna Woods, of Breast Cancer Care, said yesterday. "New treatments are increasing survival rates all the time and the companies are not keeping track enough."

Read more: Thousands of cancer patients ‘unfairly’ denied life insurance

It’s that time of the year again: open enrollment time. This means you will be among millions of workers who will be evaluating their health-, home-, life- and disability-insurance options. Choosing the right coverage can be a trying experience and you need to check every aspect before you zero in on the policy that’s best suited to your needs. Columbusdispatch.com reports:

Because insurance is so critical for any financial plan, your best defense is a good offense: becoming better informed. You can do that by reading Lankford’s book, The Insurance Maze: How You Can Save Money on Insurance And Still Get the Coverage You Need ($18.95, Kaplan Publishing).

Read more: It’s a good time of year to learn more about insurance costs, options

One of the biggest failures of the life insurance industry is its inability to educate people about the need for life insurance. Even today, decades after life insurance was introduced, many people believe the need for life insurance corresponds directly with your chances of dying. So, the argument goes, the higher the probability of your death, the more need you have for life insurance. Nothing could be farther from the truth.

What most of us don’t realize is that if we have people who are dependent on us and our income, we just need life insurance. This will ensure that our dependents like spouse, children, parents, siblings,… don’t suffer financial problems in the event of our death. So, it doesn’t matter how young or old you are or what your profession is. The ground rule is that anybody who depends on you in your lifetime should not have to financial problems after your death. Freep.com reports:

Estimate the immediate expenses your family would incur in the event of your demise. Include funeral costs, lawyer fees, mortgage and car payments, daily expenses and outstanding debts.Determine how much missing income your family will need and for how long. Consider your salary and how many years you’ll want to replace it.

Read more: Life policies must cover income, survivors’ needs

While life insurance is intended to provide a prop to your family in the event of your premature death, sometimes it can cause a bit of problem. Though income tax does not apply to a life-insurance payout, estate tax does and it could take away a really big chunk of your insurance amount. One of the options to avoid this is by creating a life insurance trust.

If you have a substantial policy that could push the value of your estate above the tax threshold (currently $2 million) you could be in trouble. One way out is to create an irrevocable life-insurance trust, a legal entity that will own the policy while you’re alive. The trust will pay the proceeds to the beneficiaries you’ve designated after you die. A trust works with both cash-value (whole, universal) and term policies.

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. Just as when you first buy a policy on your home, life or car, you need to make sure 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. The comparison becomes even more important if you think your insurer is raising the premiums more than you expected.

In case you have a whole life insurance, try to get rid of riders that you no longer need. If there are any policy loans that are earning less than the interest you are paying on them, it is prudent to pay them off. If you don’t need as much coverage as you’re paying for, you can even ask your insurer if you can reduce the face amount. This is known as a partial surrender, and works out pretty fine, only remember to watch out for extra fees.

If you are planning to cans in your policy, try to find out options to save your taxes. You could consider a 1035 tax-free exchange. That will let you transfer your money to another insurance policy or to an annuity and continue to defer taxes on any gains made within the policy.

HCC Insurance Holdings Inc recently said that it has closed its $140 million purchase of the health insurance unit of Allianz Life Insurance Co. The deal, which was first announced in August, was funded with existing capital resources and without incurring any additional debt. Msn.com reports:

Following the close of the deal, HCC Life Insurance Co. will write more than $750 million in annual premiums, covering more than 15 million lives for health insurance, HCC said.

Read more: HCC Insurance Closes Buy of Allianz Unit

Fidelity Investments is offering employers a way to help workers stretch their savings by locking in a steady income stream. This is in response to the risk many Americans face of running out of money during retirement. Reuters.com reports:

Fidelity’s so-called Lifetime Income Solutions annuity selections program is being offered at a time when American retirement savings rates are low and many companies are abandoning the pensions millions of Americans had long relied on to live comfortably after leaving their jobs.

Read more: Fidelity offers way to stretch retirement income