by zhl203 » Tue Dec 08, 2009 04:26 am
When you have family members depending on your income, saving for the future of your loved ones is a good idea. Investing in life insurance will give you enough financial support to take care of the future of your loved ones when you are no longer around. A life insurance plan also makes provision for a cash value where a part of your premium is put into a savings account. Hence, while you invest for a secured future, you can make savings too.
Topics covered
- What is Life Insurance?
- What are the types of life insurance?
- How to save money on life insurance policy?
- How to decide on the type of life insurance to choose from?
- Can you pay your mortgage with life insurance?
- How should you choose a life insurance company?
- How does a life insurance company choose you?
What is life insurance?
Life Insurance means insuring your life to save for the future of your family. If you have family members depending on your income you may invest in life insurance. This is a contract between you and your insurance company where your insurer agrees to pay a certain amount of money to your beneficiary in the event of your death.
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What are the types of life insurance?
- Term Life Insurance:
For those who are running on a budget, you can opt for a simple life insurance. Term life insurance allows the beneficiary death benefits for a specific period or 'term'. This term may be 1 or more years and the benefits are paid only in the event of death of the policy holder within the term of the policy.
There are certain term life insurance that can be renewed for more than one additional term. However, if you do so, your premiums may go higher. You may even sometimes be allowed to trade your term life insurance for a whole life insurance policy.
Term Insurances are of 5 types:
- Annual renewal term insurance: Allows you to renew your term insurance every year till you reach a specific age which often freezes at 65.
- Renewable term insurance: With expiry of the term of the policy (generally 5-20 years), you can automatically renew the policy even if your health condition has worsened. It is similar to the annual renewable policy but this one is for a longer period of time.
- Level premium term insurance: Ensures that your premiums will not go higher for the term (between 5 and 20 years) of your policy.
- Decreasing term insurance: Allows your premiums to stay level throughout while decreasing your cash benefits each year. Such policies are usually used to cover items whose costs decrease with time.
- Convertible term insurance: With this policy you may convert your term insurance into any other type of life insurance policy that the company offers.
- Whole Life Insurance:
A whole life insurance covers a policy holder for his entire life. There is no date of expiry like in a term life insurance and the death benefits will be received by the beneficiary mentioned in the policy only in the event of the death of the policy holder. If you buy a whole life insurance you will have to pay a higher premium as compared to a term life insurance. The reason for this is that a certain portion of the premium paid for whole life insurance is put away into a savings program.
When you compare the total premiums paid for whole life insurance and the total premiums paid for term life insurance it is seen that whole life insurance is less expensive. Even if you pay higher premiums for whole life insurance, the fact is that the premiums remain the same throughout the tenure of the insurance. But in the case of term life insurance, you may be paying lesser premiums in the beginning, but as you renew your term policy, premiums will increase. Hence, the total value accrued in term policy is bigger than a whole life insurance.Certain clauses in a whole life insurance allow you to pay premiums for a lesser period of time. The greatest advantage in this policy is that the premiums develop cash values that may be claimed or used for purchasing rider policies for more protection. Few of the whole life insurance benefits are:
- Guaranteed death benefits
- Guaranteed cash values
- Fixed annual premiums
A whole life insurance also known as "straight life" or "ordinary life" insurance, is not just an investment for your future alone, but also for the future of your family.
To understand the basic difference between term life insurance and whole life insurance click here.
- Universal Life Insurance:
Universal life insurance is a flexible policy that provides security for you and your family. To know more please click here.
How to save money on life insurance policy?
When you shop for life insurance coverage, there are certain ways by which you can save money on your policy. You must look for a policy that meets your needs and the right kind of benefits received. If you think that buying a policy with a low premium will save your money think again. If you buy inadequate insurance, it will be a sheer waste of money. However, you can maximize your life insurance dollars using some of the tips provided here.
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- Seek financially sound companies: Look for companies that are financially strong so that when your beneficiary(s) make a claim, he may receive the benefits of life insurance without hassle.
- Shop around: Get life insurance quotes from more than one insurance provider. You may even ask an insurance agent or an insurance broker to get you few insurance quotes from different carriers. You may then compare the quotations and find a policy that suits your needs as well as pocket.
- Seek group insurance: Employer provided group life insurance is often given at subsidized rates so you may find a less expensive policy here. Even if you have to pay premiums out of your own pocket this might be a good idea for the subsidized rate they provide. However, premiums paid by you will probably be through payroll deduction which is convenient. But a comparison of group and individual rates depending on your age, health must be done to assess which is the best policy for you.
- Change in lifestyle: Maintain a healthy lifestyle. Smoking may rate you as a risk option and you may have to pay higher premiums. Exercise regularly and consider making more lifestyle changes if necessary.
How to decide on the type of life insurance to choose from?
You may go for term life insurance if:
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- You need to make a short term investment and not a permanent one. With term life insurance benefits you can ensure the education of your children if you can invest in time. If there is a debt that you have to pay off, you may invest in term life insurance. Term life insurance covers you for a term of 5 to 20 years.
- You need a big amount of life insurance with a premium that suits your pocket. A term insurance usually pays only in the event of death of the policyholder. However, if you are alive at the time the policy ends, term life insurance coverage will stop until you renew it. But here, you will not build a savings like in a whole life insurance.
- You need life insurance stretching for the tenure of your life. A whole life insurance would pay the beneficiary the death benefit no matter when the policyholder dies.
- You feel the need to accumulate a savings on a tax-deferred basis. A whole life insurance has its own savings program that puts aside a certain portion of the amount you pay as premiums into the savings program.
Can you pay your mortgage with life insurance?
Yes. With mortgage life insurance your mortgage loan can be paid for in the event of your death in a time when the loan is not paid off fully. This insurance is available for 15 and 30 years where for the first 5 years, the amount of insurance is level and then decreases on an annual basis. The premiums for mortgage life insurance can be paid annually, semi-annually, quarterly or monthly.
How should you choose a life insurance company?
When choosing a life insurance company, take the following into consideration:
- Identity of companies - Make sure to know the full name, office location and affiliation of the insurance company that you plan to buy from.
- Product sold - Check out what products the company is selling. Most often the companies provide a wide range of policies. Check for what you need and if they have it you may consider buying from them.
- Financial Security - Select a company that is strong financially and has been in business for long. Your life insurance is an investment to secure your lifetime. Be sure that your insurance company will make life easy for you and not otherwise.
- Ethics - Check if your company abides by the codes of conducts and principles of the Insurance Marketplace Standards Association. This non-profit organization promotes ethical conduct in life insurance marketing.
- Agent - An agent is supposed to help you out with your insurance needs on behalf of the company. You must consider taking help from a reliable person only. If there is any discomfort in dealing with the agent, move to another one.
- Cost of insurance - Based on your age, type of policy and features, and the amount of insurance to be purchased, compare one insurance company with the others. Find out one which offers a better coverage.
- Claims - A national claims database will give you the complaints (if any) against an insurance company. You may want to check to find if the company you are considering buying from is listed for consumer complaint.
How does a life insurance company choose you?
Your application for a life insurance policy has to go through the insurance underwriting process before it's approved. The underwriters evaluate the risks associated with your application and forward it to the insurance processing department of the company.
Factors that influence underwriting procedure for Life Insurance- Age of the individual to be insured.
- Gender of the person
- Pre-existing medical conditions
- Medical records of the family
- Smoker or non-smoker
- Mental health of the person
- Occupation
- Hobbies or lifestyle habits (activities like race car driving, mountain climbing or bungee jumping might be marked as risky)
- Driving records
- Credit history
- Selection of coverage limits, benefits etc.
- Medical reports after thorough health check-up including tests like :
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> Blood pressure level
> Blood sugar level
> Cholesterol level
> Weight of the individual
> Urine tests
> Blood tests
> EKG/ECG
> X-Rays
> Stress tests etc.
Click here to know how the above mentioned factors affect the rates of a life insurance policy.
Your life insurance policy might not come to your assistance in your lifetime. However it'll help securing the future of your loved ones when you won't be there to take care of them. A small amount spent at regular intervals will thus be able to give you the sense of security, as you hand over the risks to your insurer. TopRelated Discussions
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My parent bought whole life insurance that pays dividends many years ago. The sales representative told my parent that she can stop paying premium in approximately 12 years because the it policy would be able to pay for itself at that time. And at the same time the policy will make annual distributions to my parent. What does that mean? Is there such thing?
The reason why I'm asking is because they're into the 13th year now and they are still paying the expensive premium. When I called the representative, they told me that the account has accumulated certain cash value and dividend, but the accumulated dividend can only cover approximately 3 years of premium.
I did some research, I understand that the cash value is like equity, but is it truly equity like we really own the money? if yes, when can we cash out the equity? if we cash out, the policy terminates? I understand that when the insured dies, the beneficiary would get paid the face amount, but what happen to the cash value? who gets it? Also, what happen if the insured dies of old age (not due to accident), is it still covered by the policy? what happen to the cash value?
Thanks in advance for your help.
The reason why I'm asking is because they're into the 13th year now and they are still paying the expensive premium. When I called the representative, they told me that the account has accumulated certain cash value and dividend, but the accumulated dividend can only cover approximately 3 years of premium.
I did some research, I understand that the cash value is like equity, but is it truly equity like we really own the money? if yes, when can we cash out the equity? if we cash out, the policy terminates? I understand that when the insured dies, the beneficiary would get paid the face amount, but what happen to the cash value? who gets it? Also, what happen if the insured dies of old age (not due to accident), is it still covered by the policy? what happen to the cash value?
Thanks in advance for your help.
Posted: Wed Dec 28, 2011 12:39 am Post Subject: Legal age to receive Life Insurance proceeds in Missouri
Need to know what is the legal age a dependent child can receive life insurance proceeds in the State of Missouri.
Posted: Wed Dec 28, 2011 08:26 am Post Subject:
Age 18. This is the age of majority in all states.
Having said this, most states utilize the Unform Transfers to Minors Act (UTMA) which allows a donor to delay ownership of a trust account for a minor child to as late as age 21 or 25 --depends on state law.
That would not be applicable to life insurance proceeds unless they were payable to a trust under UTMA. Most states have adopted UTMA over UGMA which makes the age of transfer 18 under all circumstances.
Posted: Sun Feb 05, 2012 11:49 am Post Subject: Lapse - Termination of Policy
I really don't like dealing with any kind of insurance on any level. I admit it's because of my lack of knowledge regarding the subject. I recently received a 1099-R from Phoenix Life Insurance so I assume the policy has gone beyond lapse, grace period and terminated since the automatic premium payment loan amount was less than the premium. Do I still have options ? I bought the policy in 2008, paid up additions & option term whatever that is. I want to make sure I haven't blown this completely. Many thanks.
Posted: Sun Feb 05, 2012 11:03 pm Post Subject:
Email me with the particulars of your situation. There may be some hope of reinstating or pursuing some other action against the insurance company.
Posted: Mon Feb 27, 2012 03:37 pm Post Subject: Insurance Fraud
My late husband had 2 life insurance policies for over 30 years. Between a divorce attorney, and Statefarm insurance Attorney, they constituted fraudulent misrepresentation of an "Agreed" Order , in 2006 and again in 2010, to have life policy premuims diverted to to the "ex" wife from the premuims. It is clear the StateFram wasnever party to this, and the ex wife's attorney lied about the :agreed" order. All this happened everytime my husband would be out of the country. We have now lost our policies, my husband had died because of all this stress, and I need to know how I can get help with this. Is there somebody I could contact, this is very sensitive and could involve many people. Please advise!
Posted: Mon Feb 27, 2012 10:33 pm Post Subject:
If there is merit to your allegations and a case can be put together, it may be possible to obtain some restitution or compensation. Please contact me.
Posted: Wed Apr 11, 2012 12:46 pm Post Subject: Life Paid at 98
Hi, my mom has a policy that states it is a "Life Paid at 98". Her payment used to be around 200 a month. Recently they have sent her bills double that amount. When she asks her representative he says it is because my dad smokes. But the policy was written with the knowledge that he smoked. She wanted additional details and all he said was to contact Metlife but Metlife says to contact our representative. Isn't it to my understanding that premiums for this policy stays consistent? Thank you for any help in advance.
Posted: Wed Apr 11, 2012 06:40 pm Post Subject:
my mom has a policy that states it is a "Life Paid at 98". Her payment used to be around 200 a month. Recently they have sent her bills double that amount.
This is not enough information to be able to give you a good answer to your question.
Any number of kinds of life insurance could be Paid UP and Age 98 (or 95, 100, 65 or . . .). What your mom's policy probably is is something called Universal Life (or Flexible Premium Adjustable Life"). You will find those words somewhere on the front cover or the first page or two of the policy. Or you will find words describing something else, such as Modified Premium Whole Life.
Once a policy is issued, a person's underwriting classification will not change, except to get better. The agent is lying when he says the premium increase is due to tobacco use. Why he is lying is a different matter.
If, as I suspect, the policy is Universal Life, it is going to continue to get more expensive every year, until your mom can no longer afford to pay the premiums, and the policy will die just before your dad does.
Send me an email with the more important details identified above, and I can give you some better, and confidential guidance. Just click on the email icon below.
Posted: Thu Apr 19, 2012 10:49 am Post Subject: life insurance through an employer
my husband has life insurance for both of us through his employer, they sold to a different company and the insurance changed, shouldn't we have gotten reimbursed for all we had paid in, and the company is going to sell again, so all our insurance will change again, i feel like we are being taken?
Posted: Sat Apr 21, 2012 09:13 pm Post Subject:
You don't provide enough information to be able to give you an answer. I am currently involved in several investigations of group and individual insurance misrepresentation. Send me an email with more details, names of companies, types of policies, and dates of policies, and I'll be happy to review your situation. If you are entitled to some form of reimbursement, I can help you get it.
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