Life Insurance Lowdown

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

One of the biggest benefits of having a life insurance is that you can leverage funds to create an estate that can provide for survivors or to leave something to charity. In case you want a type of life insurance in which a lump sum of money is paid into the policy in return for a death benefit that is guaranteed to remain paid-up until you die, you should go in for a single-premium life. There are different versions of single-premium life with a wide range of investment options and you can choose the one that is best suited to your needs.

In a single-premium life insurance, since the policy is fully funded, the cash invested builds up quickly. The size of the death benefit depends on the amount invested and the age and health of the insured. A younger person is generally calculated to have a longer life expectancy. This gives the funds paid in the premium more time to grow before the death benefit has to be paid out. Also, the larger the amount of capital you initially contribute to your policy, the greater your death benefit will be. While the death benefits of insurance policies provide you with an efficient means to provide for your dependents, you also need to consider unexpected expenses that can crop up in your old age.

Did you know that in a second-to-die life insurance policy, usually, the death benefit is intended to go to the children , a charity or pay taxes owed after both spouses pass away? There are quite a few things we don’t know about this kind of policy for the simple reason that many of us don’t think of taking it. Bestsyndication.com reports:

In the U.S. there is a marital deduction permitting you to leave an unlimited amount of assets to your surviving spouse with no taxes payable at your death. Those assets then become part of the estate of the spouse and if it includes a second to die life insurance polciy it could help pay any taxes. In Canada, there is more lenient tax treatment.

Read more:Second to Die Life Insurance Policies

Did you know that close to half the population or 50 percent of America’s households don’t own life insurance. Some of these don’t think there is any need to own life insurance, while there are others who own too less. LIMRA International revealed these astounding facts in a study it conducted recently. So why does such a huge percentage of the population consider life insurance unnecessary. One reason could be that it isn’t fun shopping for something you cannot use in your lifetime.

The problem is that I find it quite difficult to buy this argument. I mean if you are a responsible person and have dependents, it is only natural that you would want to provide for them in the event of any untoward incident. So, for the sake of your next of kin, it’s important to know what you’re buying and how much you should buy. Timesdispatch.com reports:

For most people, term is best because it’s more affordable. For people who can’t afford insurance, MassMutual is offering term life policies with a $50,000 death benefit at no cost for families earning between $10,000 and $40,000.For information, call MassMutual at (800) 272-2216.

Read more: THE COLOR OF MONEY: A good time for a checkup on your life-insurance needs

The Guardian Life Insurance Company of America recently introduced the Guardian Gold Series — a new generation of life insurance for three generations of people. This new set of policies is expected to meet the needs of just about everyone from parents who want to fund their kids’ education in college and university to youngsters who want to begin on a strong financial foundation early in life. There are also policies for seniors who wish to leave a legacy for their heirs. The company claims that these new policies have been designed to work very efficiently at different stages of life for a variety of economic situations.

That remains to be seen. But what interested me was a policy that goes by the name of Whole Life Paid-Up at age 121. Interesting isn’t it? And the best thing is that it aims to address the needs of people who are living longer than ever before. This policy is issued through age 90 and offers security and tax advantages to the policyholder. This can be an especially good option for early Baby Boomers who may not be able to afford other more costly and unviable options. The L121 policy was designed to be affordable, also giving it great appeal for younger individuals who wish to begin developing their long-term goals and need a plan that suits their goals and budgets.

Then there is an all-purpose policy called Whole Life Paid-Up at age 99. This is for people who may not be young, and are not yet of retirement age. If you take an L99 policy, you’ll be able to maximize long-term performance and get significantly high cash values after 20 years or more. The best thing about the plan is its flexibility. With this policy, you can build and conserve wealth for business continuation plans, estate planning, or even supplement your retirement income.

For those who desire quick cash accumulation, whether it’s accessing cash values to cover the cost of tuition, mortgages, college loans, or other expenses, Whole Life Paid-Up at age 95 maximizes cash values in the early years. Business owners can leverage the value of this asset on the balance sheet, or use it to insure key executives.

Look at the paradox here: Today, it is becoming increasingly difficult to keep yourself healthy thanks to the rising cost of health care and of health insurance policies as well. However, life insurance has become cheaper than ever before. 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’!

As times and lifestyles change, so do the needs of consumers. Responding to these changing needs , the life insurance industry is now developing some exciting alternatives. These alternatives go much further in satisfying a variety of financial needs and objectives than traditional types of insurance and annuities. Montgomeryadvertiser.com reports:

Modern contracts offer much more financial flexibility than traditional alternatives. For example, universal life and variable universal life insurance policies allow you to adjust premiums and death benefits to suit your financial needs.

Read more: New life insurance products offer more flexibility

Most of us do pay our premiums but grudge it because, "We are after all paying for something we are never going to use." Be honest with yourself, this thought has crossed your mind at least some time. Well, let’s take a look at the scene from the other side of the fence with Derrick Wesley, an insurance agent. Southbendtribune.com reports:

“The perception that the insurance companies are making all the money is hard to overcome sometimes. But if your house is destroyed by a fire, it is there when you need it. Otherwise you couldn’t afford the $200,000 to replace it. So you have to have it.”

Read more: Insurance agent helps plan for life events

Insurance is designed to protect one from catastrophes. One thing you need to realize is that it isn’t necessary to buy every type of insurance available. However, if you do need insurance, don’t shirk this duty just because it’s another job you gotta do! The problem with insurance is that there are so many myths floating around that many people are quite confused and this may be one of the reasons why many people still remain uninsured. This time, I am going to touch upon two such myths. If you believed in any of them, it is time to change your outlook. So please read carefully:

I NEED Life Insurance: This is a myth that has been propagated by life insurance companies to increase their sales. Fact is not everyone needs to have a life insurance policy. Yes, you heard me right — life insurance is designed to take care of your dependants after your death. So, who exactly is a dependent? Usually spouses, children and parents… anybody who will be affected by the loss of your income. So, if you don’t have any dependants, then why are you paying those hefty premiums?

Only earning members need life insurance: Agreed, this is a great ego booster, but reality can bring you down with a thud. Your spouse may be a stay-at-home mum/dad. Just imagine how much this person is reducing your expenditure by multitasking. Childcare, housekeeping, food preparation, home accountant, and school transportation — all this would cost you a bomb if you tried to get it done outside. So, if the absence of your spouse and any other member of your household is going to cause you a financial hardship, go ahead and insure them as well.

Are you one of those people who place implicit trust in their insurance agent? Don’t worry, you’re not alone. Most people tend to let their insurance agent prepare their insurance policy and then walk out the door with it, without even the murmur of a question.

You may not face a problem now, but when the time comes to file your insurance claim, you may be in for a shock. Here are a few steps that will help you ensure that your policy is tailor-made for you and fulfills your requirements:

Read: Read your insurance policy. The insurance policy is the written agreement between you and the insurer. It puts the entire agreement in black and white and if you can check it to see if the policy has the coverages you paid for.

Understand: Reading involves understanding. So if you find that there are terms and jargon you cannot fathom, don’t hesitate to ask your insurance agent. They are not doing you a favor by sitting that extra time with you; you are paying them to explain the entire thing to you. So don’t hesitate.

Ask: After you’ve spoken with your agent, you feel you need some more time to review your policy, find out what time frame the insurance firm offers for a review. Some policies provide a free look period during which you may cancel your new insurance policy and get a refund.

Document: Keep all receipts and transactions between you and the agent. It is also important to document all vocal and written statements between you and your agent. This way, if your agent has promised you a particular coverage but not included it in your new insurance policy, you have a chance of getting that coverage if you need it when filing an insurance claim.